Walmart Earnings Top Estimates Fueled By Strong Grocery Sales And Back-To-School Spending

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Walmart’s second-quarter earnings exceeded Wall Street’s expectations on Tuesday as the retail giant gained ground in its grocery business and had a strong start in back-to-school sales.

Shares are down about 1% in premarket trading.

The discounter also sharpened its forecast for the year, saying it now anticipates that earnings per share will be between $6.20 to $6.35. It said it expects Walmart U.S. same-store sales to increase by 5% to 6%, excluding fuel.

Chief Financial Officer Brett Biggs said in an interview with CNBC that customers flocked to stores for items like luggage, party supplies and apparel as they were “coming out of hibernation.” Plus, he said, families have been buying backpacks and items for the classroom.

Biggs said the company is watching the delta variant closely as Covid-19 cases rise, but has not seen a change in customers’ shopping patterns.

“Mask wearing is back up again, but runs on supplies — things we saw in last March, April [of 2020] — we really haven’t seen again,” he said.

CEO Doug McMillon said in a news release the company grabbed more market share in grocery, one of its core businesses. He said it has also made progress in new areas, adding thousands of online sellers to its third-party marketplace and nearly doubling advertising sales in Walmart U.S. in the quarter versus a year ago.

Here’s what the company reported for the fiscal second quarter ended July 31, according to Refinitiv consensus estimates:

  • Earnings per share: $1.78 adjusted vs. $1.57 expected
  • Revenue: $141.05 billion vs. $137.17 billion expected

Walmart is lapping a year-ago quarter where stimulus checks lifted sales as limited store hours and customers’ concerns about Covid-19 disrupted shopping. The big-box retailer lost market share to grocery competitors with smaller or more convenient locations, according to company data shared by Walmart and its rivals, which tracked same-store sales growth. Walmart also saw a shift toward e-commerce.

Yet over the past two quarters, the discounter said it’s gaining market share in grocery again as consumers return to old habits. Customers are also making more shopping trips, too. Walmart’s transactions rose by 6.1% in Walmart U.S. and average ticket fell by nearly 1%.

Walmart reported net income fell to $4.28 billion, or $1.52 per share, from $6.48 billion, or $2.27 per share, a year earlier. Excluding items, the company earned $1.78 per share. Analysts were expecting Walmart would earn $1.57 per share, according to Refinitiv.

Walmart reported its highest quarterly revenue ever for a three-month period outside of the holiday season. Total revenue rose by 2.4% to $141.05 billion from $137.74 billion a year earlier, exceeding Wall Street’s expectations of $137.17 billion.

Walmart’s same-store sales in the U.S. grew by 5.2%, higher than the increase of 3.3% expected by analysts, according to a StreetAccount survey. Over the past two years, the retailer said its same-store sales have increased by 14.5%. During the same period, it said its U.S. e-commerce sales have doubled—with digital growing 6% year-over-year.

Same-store sales for Walmart subsidiary, Sam’s Club, increased by 7.7% excluding fuel — more than the 3.7% growth expected by analysts.

The company said it anticipates that same-store sales at Sam’s Club will increase by 7.5% to 8.5%, excluding fuel and tobacco, this year.

Walmart shares have trailed behind other pandemic beneficiaries in the retail industry. As of Monday’s close, Walmart shares were up about 5% so far this year compared with Target and Kroger, which have seen shares increase 49% and 37%, respectively, year to date. It also lags behind the S&P 500’s 33% gain.

– CNBC

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