Walmart second-quarter net income up 24.8%; e-commerce sales up 97%

Walmart’s second-quarter net income blew past analyst expectations with results fueled by a 97% increase in e-commerce sales and U.S. comp sales growth of 9.3%. Walmart’s adjusted earnings per share totaled $1.56, up 24.8%, which was 31 cents a share better than Wall Street expected.

Before adjustments, Walmart’s earnings totaled $2.27 per share, up 80% from a year ago. Walmart adjusted for 89 cents per share of unrealized gains on the company’s investment in JD.com, 10-cents for restructuring charges regarding the around 2,000 layoffs recently announced, and an 8-cent tax charge. Walmart also said net income was offset by $1.5 billion in incremental costs related to COVID-19 during the quarter.

Without currency adjustments revenue topped $140.2 billion, up 7.5% year-over-year. Walmart’s operating income rose to $6.1 billion in the quarter, up 8.5% with operating cash flows of $19 billion, up by $7.8 billion in the quarter.

“I want to give a big thank you to our associates for their tireless efforts during these unprecedented times. We also appreciate the trust and confidence of our customers. We remain focused on serving them well now and expanding our set of global capabilities to serve them well in the future,” Doug McMillon, president and CEO, said in the prepared remarks posted Tuesday (Aug. 18).

The stellar results were supported by U.S. sales revenue of $93.3 billion, up 9.5% from a year ago. Comp sales without fuel rose 9.3% with average ticket sales rising 27%, while trip transactions fell 14%. Roughly 6% of the comp number was attributed to e-commerce via online grocery pickup. Walmart U.S. reported an operating income of 5.1% billion up 8.5% from a year ago.

Walmart also trimmed losses in the U.S. e-commerce segment with a 97% gains in comp sales and better sales in home and apparel which carry higher margins, according to Walmart U.S. CEO John Furner who spoke with analysts during a media call early Tuesday. Marc Lore, CEO of Walmart U.S. e-Commerce, did not participate in the call with analysts.

Furner said U.S. consumers are spending more on food and eating out less. He said consumers are resilient but caution continues around job security and economic uncertainty. Back-to-school sales are off to a slower start than normal but Walmart said it is set up to serve families regardless of whether they home school or turn to the classrooms.

Sam’s Club also reported some of its best results in five years. Revenue grew 8.8% to $16.4 billion and comp sales without fuel rose 13.3%. Transactions increased 8.7% with an average ticket up 4.3%. E-commerce contributed 1.9% of the comp growth in the quarter. Sam’s reported operating income of $600 million, up 23.3% from a year ago. Growth in membership income was the highest quarterly increase in more than five years. New member count increased by more than 60%.

Walmart International had mixed results with total top-line sales of $27.2 billion, down 6.8% from a year ago. On a constant currency basis, revenue rose 1.6%. Net sales were negatively impacted by the government-mandated closures in India, Africa and Central America. Operating income was $900 million, up 0.9% year-over-year. Comp sales were up in 7 of 10 markets led by 13.9% in Canada and 10.4% in China. Comps in the United Kingdom were down 5.3% and Walmart continues to look for ways to exit the market.

Walmart execs are thinking through the holiday season and expect online sales to continue to rise as consumers make fewer trips to stores. Furner said Walmart will be ready to serve customers any way they want to shop, but it’s too early to know how the holiday season will unfold given the ongoing COVID-19 crisis.

Walmart also declined to give any guidance for the rest of the year given the uncertain climate. McMillon said Walmart is set up to grow its business because of the investments it made in pickup, delivery, online marketplace growth and overall execution. He said Walmart is executing as an omnichannel retailer across the world and it’s paying off.

Ben Bienvenu, an analyst with Stephens Inc., was bullish on Walmart ahead of Tuesday’s call with an earnings estimate of $1.29 and a comp-sales forecast of 5.6% and yet Walmart sailed past these predictions.

“These results resoundingly emphasize Walmart’s advantaged position in the consumer landscape, and we continue to see the company as a winner in the current environment and beyond. We are reiterating our overweight rating,” Bienvenu said.

Bienvenu has a price target of $160, which is under review following the second-quarter results.

Jim Cramer, a CNBC analyst and host of “Mad Money,” said Walmart is a juggernaut that continues to outperform and manages to keep its humility.

“I love what McMillon and the team are doing at this company. They are winning in spite of COVID-19 challenges,” Cramer said.

Despite Walmart’s advantageous position as a giant retailer, Cramer said McMillon continues to advocate for more stimulus for small businesses because he recognizes the value and importance to the overall economy.

Walmart shares (NYSE: WMT) bounced at the opening bell on Tuesday after a $3 uptick the prior day. Shares were at $136.24, up 64 cents, with heavy volume in the first five minutes of trading. Walmart shares are up 19% this year trading between $102 and $137.62 over the past 52 weeks.