Walmart quarterly revenue up 7.6%; net income down more than 18%

Walmart on Thursday (May 18) reported better-than-expected first-quarter results for the fiscal quarter ending April 30. The Bentonville-based retailer grew total revenue to $152.3 billion, up 7.6% compared with the same quarter in 2022. The gain beat the 5% consensus estimate.

Walmart reported adjusted earnings per share of $1.47 versus the consensus of $1.31. Adjusted earnings include a one-time charge of 85 cents per share in losses on equity investments that lowered the company’s bottom line.

Walmart’s reported net income was $1.673 billion, down 18.5% compared with $2.054 billion in the year-ago period. Reported diluted earnings per share of 62 cents were down from 74 cents earned a year ago. Operating income increased to $6.2 billion, up 17.3% from the year-ago period, amid 30% revenue growth in Walmart’s global advertising business, 27% growth in U.S. e-commerce sales and strong comp sales around the world.

“We had a strong quarter. … We leveraged expenses, expanded operating margin, and grew profit ahead of sales. And a big thank you to our associates, who continue to step up and deliver for customers and members whenever and however they want to be served,” Walmart CEO Doug McMillon said.

Walmart U.S. reported revenue of $103.9 billion in the quarter, up 7.2%. More impressive were the 7.4% comp sales, with transactions up 2.9% and average ticket gains of 4.4%. Walmart e-commerce sales rose 27% in the quarter, adding 2.7% to U.S. store comp numbers with continued strength in pickup, delivery and advertising revenue which grew 40% in the quarter.

John Furner, CEO of Walmart U.S., said the segment inventory declined 9%, and it still maintained higher in-stock levels. He said Walmart continues to be attractive to larger-income households while its core customers continue to feel cost pressures from persistent inflation. McMillon said inflation remains one of the biggest issues for Walmart. He said working with suppliers to reduce costs, particularly in dry grocery, would not only drive more unit volume for them, it would also help customers free up more cash to spend in discretionary categories.

“We continue to gain market share in the grocery category, including with higher income and younger shoppers, and we saw good growth in membership income,” McMillon said.

INTERNATIONAL GROWTH
Walmart’s international business also had a bright quarter, with net sales of $26.6 billion, up 12%. The segment benefited from strong comp sales growth led by China, Walmex and Flipkart in India. E-commerce sales rose 25%, bolstered by more in-store fulfilled orders and a growing advertising base. The international business grew operating income to $1.2 billion, up 50% from a year ago. On a constant-currency basis, operating income grew 41.5% from the year-ago period.

Walmex increased sales by 10.6% from a year ago, with comp sales rising 8.7% with strength in food, consumables and Sam’s Clubs. China grew sales 28.3% to $5.3 billion amid its reopening. E-commerce sales grew 54% in China year over year. Canada grew sales to $5.5 billion, up 6.7% year over year.

Walmart executives recently visited FlipKart and reported strong growth in the PhonePe business that reached $1 trillion in annualized Total Payment Volume, which is money processed through the platform, in the quarter. Also, the new travel business added more than 400 million users over the last year. Flipkart also continues to grow its grocery business and its international marketplace, which also is an opportunity to sell fulfillment services and advertising.

“We are committed to India and are here for the long term. I was excited to meet with the diverse Indian ecosystem of suppliers, small and medium enterprises, merchants and partners who are innovating and driving growth and opportunities,” McMillion said during his recent trip to India on May 11

SAM’S CLUB
Sam’s Club reported revenue of $20.5 billion, up 4.5% year over year. Comp sales grew 7%, with e-commerce sales growth up 19%. Sam’s reported transactions rose 2.9%, while average ticket sales increased 4% from the year-ago period.

Membership income rose 6.3%, primarily due to the continued strength of the Plus membership. Sam’s Club also celebrated its 40th birthday in the quarter with a discount to the basic membership price, which helped to push membership levels to an all-time high.

The wholesale club continues to write down inventory, taking an adjustment of $48 million in the quarter, which lowered operating income by 10% year over year. Sam’s said overall inventory was down 6% in the quarter, allowing for better merchandise flow through.

THE FORECAST
Another positive note from Walmart was a brighter full-year earnings forecast. despite weaker guidance for the second quarter to end July 31. The retailer raised its fiscal 2024 guidance to range between $6.10 to $6.20 per share, an increase of 2.5% from the former guidance.

Analysts with Jeffries said Walmart remains one of their top picks because initiatives in automation, advertising, Walmart+,  and marketplace fulfillment are building momentum that will fuel Walmart’s growth and profitability. Ben Bienvenu of Stephens Inc. also remains bullish on Walmart for many of the same reasons. Thursday, he reiterated his “buy” recommendation and said the price target of $170 is under review.

The adjusted earnings beat and raised annual guidance helped to push Walmart shares (NYSE: WMT) a bit higher in the morning session. In heavy volume, shares were trading around $151, up more than $1 ahead of the afternoon session. Walmart’s stock price has ranged from $117.27 to $154.64 over the past 52 weeks. Year-to-date Walmart shares are up about 6%.