Dive Brief:

• Walmart on Thursday reported third quarter total revenue rose $1.7 billion, or 1.4%, to $124.9 billion. The retailer noted its omni-channel efforts continue to progress, lead by grocery pickup which is now available in 2,100 locations with delivery in almost 600 places.

• In the U.S., sales rose 3.7% and store comps rose 3.4%, "with broad-based strength and market share gains in key categories," the company said in a press release. In its wholesale division, Sam's Club comp sales rose 3.2%, with improving membership trends, and e-commerce sales grew 32%.

• Overall, operating income jumped 4.7% to $5 billion, and U.S. operating income rose 2.9% to $3.9 billion.

Dive Insight:

Walmart is making its move on Amazon, demonstrating in the quarter that its brick-and-mortar advantage, along with innovation and investments led by U.S. e-commerce chief Marc Lore, are paying off.

"Q3's impressive performance continues to validate Walmart's long-term investment strategy, with solid revenue and operating margin growth, as well as online sales growth of 43% continuing to exceed the company's stated goal for 2018," Moody's Investors Service Lead Retail Analyst Charlie O'Shea said in an analyst note. 

During the past 12 months, Walmart has grown its market share in every major online category, with rising levels of satisfaction with its web offering among younger shoppers, according to data from GlobalData Retail. What appears to be surprising analysts is that the retail giant is accomplishing it with steady profits. Its grocery concessions are helping, according to Bob Phibbs, CEO of retail consultancy Retail Doctor.

"The path to the consumer in a lot of ways is through the grocery store," Phibbs told Retail Dive in an interview. "They're probably making a bigger bet on data than most people realize. They're hitting that sweet spot more often, and more with a laser than with a scattershot approach."

In the past year, the grocer has rolled out a number of initiatives that have contributed to its e-commerce growth in grocery, or established a benchmark for future expansion. These innovations include testing driverless grocery delivery with Waymo in Arizona, partnering with shoppable recipe startup Myxx, proposed plans to open a pickup-only store in Chicago, testing of last-mile delivery system "Spark Delivery", its high-tech enabled fresh and frozen grocery facility that loads pallets, and most recently its partnership with Ford and Postmates to test autonomous grocery delivery in Miami.

Ultimately, these innovations have resulted in Walmart topping Kantar's PoweRanking survey as the top retailer for the 22nd consecutive year. The retailer also surpassed Amazon as the online grocer of choice among consumers, according to a survey from Retail Feedback Group. Of those surveyed, 33% said Walmart was their top online grocer, up from 26% in the previous year's survey. 

“The leveraging of its massive store network as a key driver of its prodigious online growth on a sizeable base continues at a rapid clip, with its grocery business leading this charge, and we expect the expansion of food pickup to continue to resonate with consumers for the foreseeable future, producing further market share gains in this key category,” said O’Shea.

Neil Saunders, managing director of GlobalData Retail, also noted that, along with its e-commerce push, the company isn't neglecting its stores. "[T]he refurbishment of many shops have been well received and have helped to drive up visitation, conversion and spend," Saunders noted in comments emailed to Retail Dive. "While Walmart's refresh isn't as radical as Target's, the remodels are making Walmart a brighter and more enjoyable place to shop — and in which to collect online orders. We also believe that they are helping to elevate and boost categories where Walmart has sometimes struggled for growth, like apparel."

The retailer hasn't vanquished Amazon, though, and could do more to make itself the first "port of call" for shoppers, Saunders warned. For now, Walmart is well positioned for the holidays, he said, noting that its strong convenience through pickup and delivery options will draw shoppers, as will its "enhanced ranges" in toys and clothing. If the grocer can increase its dominance in its grocery e-commerce unit, it could further push Amazon out of the picture.