Analysts estimate 5% revenue growth in Walmart’s first fiscal quarter

Equity analysts and investors are not expecting any surprises from Walmart when it reports first-quarter earnings early Thursday (May 18). The Bentonville-based retail giant recently spent two days with the investment community detailing its earnings expectations for this year and beyond.

Walmart is expected to report about $3.5 billion in consolidated net income for the first quarter of fiscal 2024, which began Feb. 1 and ended April 30. That’s $1.30 per share on an adjusted basis and flat from the year-ago period. Walmart provided guidance of adjusted earnings per share between $1.25 and $1.30 at the investor meeting held last month. Sales revenue is expected to increase by about 5% to $148.52 billion, based on Walmart’s guidance and the equity analyst consensus.

The annual comparison should be easy as net earnings per share dropped 23% a year ago on higher-than-anticipated inventory. Revenue also fell 3% in the year-ago period. Walmart executives have recently said inventory numbers have dropped from the 32% overstock experienced in early fiscal 2023.

Analysts and investors will be focused on margins that have been under pressure while inflation has buoyed top-line growth. Brian Gilmartin, an investment advisor at Trinity Asset Management, said the earnings guidance Walmart gave for this year was weak, but the retailer usually under-promises and over-delivers.

Zacks Investment Research analysts said Walmart shares had tracked the broader market year-to-date. But since the onset of regional banking uncertainty after the Silicon Valley Bank failure in early March, Walmart has been a notable outperformer, up 4.9% in that period versus an 0.8% gain for the S&P 500 index.

“The stability in Walmart shares makes intuitive sense, as its core business offers a high degree of defense during periods of economic instability and uncertainty. Walmart’s ‘value orientation’ allows it to gain market share as relatively better-off consumers ‘trade down’ during times of economic stress,” analysts with Zacks reported Monday.

Analysts also said Walmart’s large grocery business gives its results greater stability given the uncertain nature of the otherwise low-margin business. Groceries also drive foot traffic and are also responsible for the ‘trade down’ phenomenon that is helping Walmart gain share, noted the Zacks report.

“Walmart will likely be a winner this week among those retailers reporting earnings in part because of its strong grocery and online businesses. Walmart is benefiting from cost-conscious consumers trading down to lower price options. This has helped Walmart not only retain its customers but also attract more higher-income households,” said Christine Short, vice president of research with Wall Street Horizon.

Oliver Chen, an analyst with Cowen & Co., said Walmart is set up to win because 60% of its business is food and essentials, which are categories that have been solid. Chen said Walmart+ has about 24 million members and continues to gain steam. Chen also expects Walmart will report better-than-expected earnings fueled in part by its ancillary businesses, such as Walmart Connect ad sales and Go-Local deliveries for other retailers.

Walmart’s U.S. business is expected to report same-store sales up 2%. Sam’s Club has been the best performer of late among the retailer’s divisions and is expected to report a 5% gain in same-store sales. Walmart U.S. and Sam’s estimates do not include fuel sales. The combined international comp sales are expected to grow 5.5% on a constant-currency basis.

Walmart shares (NYSE: WMT) closed at $151.88 on Monday, down $1.19. Over the past 52 weeks, shares have traded between $117.27 and $154.64. Year-to-date the share price is up 7.12%.