Earnings

Grocery And eCommerce Push Walmart’s Earnings Win

Walmart

Walmart managed to mostly exceed analysts expectations when it released its latest earnings figures earlier today (May 17), news that sent its stock up 1.9 percent in premarket trading. In particular, the big-box retailer reported strength in sales, consumer spend, inventory reduction, eCommerce activity and growth in its grocery business, according to CNBC reports.

“Online grocery continued to accelerate, and [we] had the new Walmart.com site redesign late in the quarter,” Brett Biggs, chief financial officer, said. “We also have new brands in eCommerce, including the partnership with Lord & Taylor, so there are a lot of different things driving growth there.”

By the numbers, Walmart reported earnings of $1.14 per share that beat the $1.12 per share forecast by analysts. Revenue came in at $122.69 billion, beating out the $120.51 billion forecast. Same-store sales also came in ahead of analysts’ expectations, with 2.1 percent growth as opposed to the forecast 2 percent. Sam’s Club also had a strong performance, with sales up 3.8 percent and driven by comparable traffic growth of 5.6 percent.

“Sam’s Club had one of its best quarters,” Biggs said. “Fresh food has been a strength.”

Walmart also reported its 12th-straight quarter of declining comparable inventory levels.

On the eCommerce side, the company’s momentum seems to have recovered some after a Q4 dip that made analysts nervous. U.S. eCommerce sales grew 33 percent in the first quarter, up from the 23 percent in Q4. Walmart continues to forecast 40 percent growth in online sales for 2018.

Walmart did have some knottier numbers to report, however. Year-on-year, it noted its net income fell to $2.13 billion, or $0.72 per share, from $3.04 billion or $1 per share at this time in 2017. It also has some big items on its balance sheet, particularly its recent $16 billion acquisition of India-based Flipkart.

The big-box retailer is betting that access to the emerging commerce market of India’s developing middle class will outweigh the big upfront costs of acquiring the currently unprofitable eCommerce business. To help pay off that move, Walmart plans to exit its stake in British grocer Asda and merge the business with peer J Sainsbury.

While Flipkart is its biggest ticket item, Walmart’s international activity has been particularly busy of late. All in, it reported net international business sales of $30.3 billion for the quarter, an increase of 11.7 percent. It also announced it has officially reached agreements to sell its banking operations in Walmart Canada and Walmart Chile.

“We’ve made a number of announcements of strategic moves we believe will strengthen our position around the world, [and] Q1 is a good example of why we are able to do that,” Biggs said. “We are in a great financial position and the underlying business was very strong.”

Walmart’s Q1 profits were hurt by a fall in the share price of Chinese eCommerce company JD.com, and its increased fuel and logistics costs also took a bit out of its bottom line.

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