When Walmart (NYSE:WMT) releases its second-quarter fiscal 2023 earnings report on August 16, top-line growth is most likely to be seen. The $151.4 billion Zacks Consensus Estimate for quarterly revenues indicates an increase of 7.4% from the reported amount for the corresponding period last year.
The bottom line, though, probably fell year-over-year. In the past 30 days, the Zacks Consensus Estimate for quarterly earnings has dropped 12.1% to $1.60 per share, a 10.1% fall from the amount reported in the prior-year quarter. The giant grocery store chain had an average trailing four-quarter earnings surprise of 2.4%. Its most recent reported quarter saw a roughly 11% negative profit surprise.
Cost Headwinds Will Persist
The grocery store company is battling bottlenecks in the supply chain. In the most recent reported quarter, the company’s consolidated gross profit margin shrank by 87 basis points (bps), principally due to Sam’s Club, where the gross margin dropped 219 bps. This was brought on by markdowns resulting from the delayed goods, supply-chain expenses, a fuel mix, and inflation. Although it is projected to increase sequentially, management predicted that the gross margin would continue to be under pressure in the second quarter on its earnings call for the first quarter.
In addition, due to rising wage expenses at Walmart U.S., SG&A costs increased as a percentage of sales by 39 bps in the first quarter. The main reason for the 45 bps increase in consolidated operating expenses as a percentage of sales over the previous year was higher salary costs at Walmart U.S. Some of the cost difficulties likely lingered in the second quarter. These elements give cause for concern for the current quarter.
Walmart’s Sales Picture Appears Promising
The company has gained from its initiatives to improve in-store and online operations. It has been making various attempts to improve the product selections. It has also been concentrating on refurbishing existing stores to modernize them with cutting-edge in-store and digital advancements. The company has been attracting customers because of its appealing price strategy.
Walmart’s efforts to expand its online business have been successful, particularly its initiatives to improve delivery services. As evidenced by its agreement with Canoo, the expansion of the in-home delivery service, the investment in DroneUp, a pilot with HomeValet, the introduction of Carrier Pickup by FedEx, the launch of the Walmart+ membership program, drone delivery pilots in the United States with Flytrex and Zipline, and a pilot with Cruise to test grocery delivery using self-driving all-electric cars, the company has made significant strides to strengthen its delivery division.
Before that, the retail company improved its delivery service by introducing Express Delivery, teaming up with Point Pickup, Roadie, and Postmates, and purchasing Parcel. The company’s retail and curbside pickup choices also increase customer convenience. Walmart U.S. had 4,600 pickup locations and more than 3,600 same-day delivery stores as of the first quarter of fiscal 2023.
In addition, Walmart is establishing new businesses, including Walmart GoLocal, Walmart Connect, Walmart Luminate, Walmart+, Spark Delivery, and Marketplace, while also innovating in the supply chain and expanding capacity.
Walmart U.S.’s second-quarter sales are expected to total $104.3 billion, up from the $98.2 billion recorded at the same time last year, according to the Zacks Consensus Estimate. The consensus estimate for Sam’s Club and Walmart International is currently $24.1 billion and $21.7 billion, respectively. This is an increase over the estimates of $23 billion and $18.6 billion for the same period last year.
Shares are down by approximately 10% since the start of the year.
Featured Image: Megapixl @Wjhowardphotography
