Walmart Inc. (NYSE:WMT) released its fiscal 2023 second-quarter results, with top and bottom lines that beat the consensus prediction, with the former rising year-over-year. The stock rose more than 5% on Tuesday morning.
Walmart’s Overall Results
Walmart’s adjusted earnings of $1.77 per share decreased by a penny from the $1.78 per share recorded in the same quarter last year. The metric was higher than the $1.60 Zacks Consensus Estimate.
Walmart posted $152.9 billion in total revenues, an 8.4% increase, exceeding the average estimate of $151.4 billion. On a constant-currency (cc) basis, total revenues increased by 9.1%. The increase in revenue was helped in part by inflation.
The U.S. segment’s markdowns, sales mix, and a LIFO charge for inflation at Sam’s Club were the leading causes of the consolidated gross profit margin’s (bps) decline of 132. Walmart U.S.’s gross margin decreased by 106 basis points due to higher general merchandise markdowns, a change in the mix toward groceries, and higher cost inflation, which were somewhat offset by pricing.
The operating income at cc decreased 6% to $6.9 billion. Due to strong sales growth and salary investments, consolidated operating expenses as a proportion of sales decreased by 45 bps year over year.
Walmart Connect in the U.S. and Flipkart advertising contributed to a 30% increase in WMT’s global advertising revenue.
Results By Segment
Walmart U.S.: In the cited quarter, the segment’s net sales increased 7.1% to $105.1 billion. U.S. comp sales, excluding fuel, increased by 6.5% as a result of an increase in average ticket of 5.35% and a rise in transactions of 1% year-over-year. Comp sales were primarily fueled by a strong performance in the food categories, strong private brand sales, and a higher average ticket. The groceries and health & wellness categories both saw an increase in comp sales. Market share in groceries for the sector kept rising.
Comps were lifted by 100 bps by e-commerce. The segment’s e-commerce revenues increased by 12%. The growth of e-commerce sales over two years was 18%. Walmart U.S. had more than 3,800 same-day delivery sites and 4,600 pickup locations as of the second quarter. The company renovated over 180 locations during the quarter. The Walmart U.S. segment’s operating income fell by 6.7% to $5.7 billion.
Walmart International: Net sales for the division increased by 5.7% to $24.4 billion. Currency fluctuations had a negative effect of $1 billion. The increase in net sales was 9.9% on a cc basis. The company saw an increase in comp sales in its three largest markets, China, Canada, and Mexico. The operating income increased by 28.3% to $1.1 billion on a cc basis.
Sam’s Club: The segment’s net sales rose 17.5% to $21.9 billion, making up membership warehouse clubs. Without fuel, Sam’s Club comp sales increased by 9.5%. While transactions increased by 9.8%, average ticket prices increased by 0.2%. Most categories, driven by food and consumables, experienced broad-based growth in comp sales. Tobacco, however, reduced comp sales.
Strong membership trends and a record number of total members are reflected in the quarter’s 8.9% increase in membership income. The plus penetration rate kept increasing. E-commerce increased comps by 170 basis points. On the strength of a solid direct-to-home show and a robust curbside performance, Sam’s Club’s online net sales increased by 25%. Operating income for the division came in at $0.4 billion, down 35.3% from the previous year.
At the end of the quarter, Walmart had $85.6 billion in total equity, $13.9 billion in cash and cash equivalents, and $29.8 billion in long-term debt. WMT has generated an operating cash flow of $9.2 billion this year while spending $7.5 billion on capital projects, leaving $1.7 billion in free cash flow. The company set aside $3.3 billion for share buybacks and $1.5 billion for dividend payments during the reported quarter.
Walmart Raises its Guidance for 2023
For fiscal 2023, Walmart now anticipates consolidated net sales growth of almost 4.5%. The metric is predicted to increase by about 5.5% without divestitures. Earlier, the management projected a nearly 4% increase in CC’s consolidated net sales. The metric was predicted to increase by close to 4.5–5%, excluding divestitures. Compared to the 3.5% growth anticipated previously, U.S. comp sales, excluding gasoline, are now estimated to be about 4%. U.S. comp sales, excluding fuel, are projected to increase by about 3% for the second half of fiscal 2023.
Due to better results in the second quarter, management anticipates the consolidated adjusted operating income decreasing 9–11%. Before, a fall of 11–13% was predicted for the indicator. Management expects the consolidated adjusted operating income to drop 8–10%, excluding divestitures.
In fiscal 2023, management expects EPS to fall between 9 and 11%. EPS is anticipated to decline by 8–10%, excluding divestitures.
Walmart anticipates consolidated net sales growth of close to 5% in the third quarter of fiscal 2023, despite approximately $1.3 billion in currency headwinds. Walmart U.S. forecasts a 3% increase in comp sales (excluding gasoline). The combined operating income is anticipated to fall 8–10%, and the EPS will probably fall 9–11%.
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