Walmart first quarter revenue up 8.6%, net income up almost 4%

Walmart on Tuesday (May 19) reported revenue of $134.6 billion, above the $132.7 billion consensus estimate and 8.6% better than a year ago. Net income was $3.99 billion, up 3.9% from a year ago.

Earnings per share totaled $1.40 less a charge of 22 cents relating to the JD.com investment in China. Adjusted earnings per share of $1.18 beat Wall Street’s consensus estimate of $1.12, compared to adjusted earnings of $1.13 a year ago. Walmart said it incurred incremental costs of nearly $900 million in the quarter related to COVID-19, with 75% related to the employee bonus with the balance to clean stores and equip them to operate through this pandemic.

Walmart expects similar COVID-19 expenses in the second quarter but pulled its guidance for the fiscal year given the uncertainty in the economies around the world.

Walmart is also discontinuing the jet.com business. CEO Doug McMillon said the company will focus growing the Walmart.com brand. He said most of the Jet.com employees were already moved under the Walmart.com operations. Walmart paid $3.3 billion for Jet.com nearly four years ago and has been slowly unwinding the business unit for the past 18 months.

The retail giant’s online sales rose 74% in the quarter. Robust online grocery sales began the quarter, followed with higher-margin sales and more discretionary spending in April as stimulus money began to flow into customer’s hands. Walmart U.S. eCommerce CEO Marc Lore said the first and third-party marketplace business continues to grow adding brands such as Keds and Ray-Ban to the site offerings. Walmart said losses in its U.S. e-commerce business were also lower in the quarter.

The U.S. segment posted comp sales of 10% for the quarter which were led by strength in food, consumables, health & wellness and some general merchandise. McMillon said the company has hired 235,500 people to help run U.S. operations during the COVID-19 crisis. Gross margins were compressed in the U.S. business as sales of general merchandise were weak in the first half of the period with eye care, auto centers and other service areas closed. Walmart U.S. CEO John Furner said the company would slowly reopen closed services in the coming weeks in areas where COVID-19 cases are low and as states and counties dictate reopening guidelines.

McMillon said the work of employees during this time of crisis has been “amazing.”

“They are rising to the challenge to serve our customers and our communities. I’m proud of how they’re adapting and performing. Our omnichannel strategy, enabling customers to shop in seamless, flexible ways, is built for serving the needs of customers during this crisis and in the future.” McMillon said.

Wall Street applauded the results, sending Walmart shares (NYSE: WMT) shares higher. Shares were trading at $129.88, up $2.22 in the earning morning session, while the overall market was trading lower. Ben Bienvenu, an analyst with Stephens Inc., was pleased with the quarterly results.

“The quarter represented a strong top and bottom-line beat relative to our and street expectations. Additionally, the result further underscores the durability of the business model as well as management’s ability to nimbly navigate through challenging operating conditions. We are reiterating our overweight (buy) rating,” he noted.

Jan Kniffen, a consultant with J. Rogers Kniffen Worldwide, was not surprised to see the robust results. He said Walmart is a machine that runs no matter what. He said management will likely continue to steer this company in the right direction with its omnichannel focus.

“Walmart knows how to please the Street and I expect that will continue,” he said.

SEGMENT REVENUE
• Walmart U.S: $88.7 billion, up 10.5% from a year ago with e-commerce contributing 3.9% of that growth.

• Walmart International: $29.8 billion, up 3.4%, which included $1.3 billion a negative hit from currency fluctuations.

• Sam’s Club: $15.2 billion, up 9.6% from a year ago. Online sales represented 1.7% of the total comp sales growth.

SEGMENT OPERATING INCOME
• Walmart U.S.: $4.3  billion, up from $4.1 billion
• Walmart International: $900 million, up from $700 million
• Sam’s Club: $500 million, flat to a year ago.

 COMP SALES
• Walmart U.S.: 10%
• Walmart International: positive in 9 out of 10 countries
• Sam’s Club: 12%, without fuel