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Walmart Inc.’s stock fell 1.4% Thursday, after the retail giant posted better-than-expected second-quarter earnings and raised its guidance, but said the consumer is still pinching from high inflation.
“Food is a strength, but we’re also encouraged by our results in general merchandise versus our expectations when we started the quarter,” Chief Executive Doug McMillon said, according to a company statement.
The company is “in good shape with inventory” and likes its position for the back half of the year, he added.
On a call with analysts, McMillion said household budgets are still under pressure. Jobs, wages and pockets of disinflation are helping our customers, but rising energy prices, resuming student-loan payments, higher borrowing costs and tightening lending standards, and a drawdown in excess savings mean that that household budgets are still under pressure,” he said. “When you put all this together, we see families that are discerning about what they’re spending on — they are setting priorities and spending on the things they care most about.”
For more, read: Walmart customers’ household budgets still under pressure, CEO says
Roth MKM analyst Bill Kirk, who has a buy rating on the stock, said the updated guidance beat elevated consensus expectations.
“Better than initially anticipated FY’24 performance is a great way to begin a multi-year period where operating profit growth can be double that of net sales,” he wrote in a note.
Bentonville, Ark.–based Walmart
WMT,
had net income of $7.891 billion, or $2.92 a share, for the quarter, up from $5.149 billion, or $1.88 a share, in the year-earlier period. Adjusted per-share earnings came to $1.84, well ahead of the $1.71 FactSet consensus.
Revenue rose to $161.632 billion from $152.859 billion a year ago, also ahead of a FactSet consensus of $160.224 billion.
U.S. same-store sales rose 6.4%, while FactSet was expecting a 4.1% gain.
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Gross margins rose 50 basis points from a year ago, as they lapped elevated markdowns and supply-chain costs, partially offset by mix pressure in the grocery and health and wellness categories.
The global advertising business grew about 35%. E-commerce sales were up 24%, led by pickup and delivery. The company gained market share in groceries with strong unit growth.
See also: Target’s stock jumps 5% as big profit beat offsets revenue miss and lowered guidance
International sales rose 13% to $17.6 billion, driven by Walmex, China and Flipkart.
Sam’s Club U.S. sales fell 0.3% to $21.8 billion, while same-store sales at that subscriber warehouse club excluding fuel were up 5.5%, led by food and consumables, as well as health.
Walmart is now expecting third-quarter adjusted earnings per share of $1.45 to $1.50 and sales growth of 4% to 4.5%. The FactSet consensus estimates call for per-share earnings of $1.49 and sales growth of 2.9%.
For fiscal 2024, it expects adjusted earnings per share of $6.36 to $6.46 and sales growth of 4% to 4.5%. The FactSet consensus is for earnings of $6.30 per share and sales growth of 4.4%.
The stock has gained 12.3% to date in 2023, while the Dow Jones Industrial Average
DJIA,
has gained 5% and the S&P 500
SPX
has gained 15%.
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