Walmart first quarter net income, revenue beat estimates

Walmart outperformed expectations in its first quarter earnings report Thursday (May 16). Its net income was $5.104 billion, up 205.1% from the year-ago period. Earnings per share were 63 cents, better than the consensus estimate of 51 cents.

Revenue in the quarter totaled $161.5 billion, up 6% and better than the consensus estimate of $159.6 billion. Revenue growth was led by 12.1% growth in the international business, 4.6% gains in Walmart U.S. and Sam’s Club, and a 1% gain from the additional selling day from Leap Year.

The results sent Walmart shares up more than 6% in heavy trading early Thursday.

Walmart CEO Doug McMillon said the combination of everyday low prices plus a large number of rollbacks is resonating with consumers resulting in a strong overall quarter to start fiscal 2025.

“We are growing traffic and units sold, and our inventories are in great shape for all three of our business units with improved margins and contributions from our Walmart Connect, Marketplace and Luminate businesses,” Chief Financial Officer John David Rainey said.

He said one of the factors boosting Walmart’s grocery business is the widening gap between the price of cooking at home and buying food at fast-food chains or restaurants.

“We’ve got customers that are coming to us more frequently than they have before and newer customers that we haven’t traditionally had, and they’re coming into a Walmart whether it’s a virtual store online, or whether it’s one of our physical stores,” Rainey said.

WALMART U.S.
U.S. revenue totaled $108.7 billion, up 4.6%, and operating income improved to $5.3 billion, up 7% year over year. Comparable sales rose 3.8% to top the consensus estimate of 3.4%. Transactions were 3.8% higher during the quarter, and the average ticket was flat compared to a year ago.

E-commerce sales rose 21% during the quarter and contributed 2.8% to comparable sales. Walmart said it saw growth in store-fulfilled pickup and delivery orders and marketplace sellers. Walmart also grew its marketplace sellers by 36% in the quarter. Walmart also benefited from 26% growth in the advertising business and an inventory reduction of 4.2% for Walmart U.S., which resulted in better in-stocks and fewer markdowns.

Walmart U.S. CEO John Furner said the consumer has been remarkably consistent over the past two years. He said seasonality played well in the quarter, with strong Valentine’s and Easter sales.

Walmart announced the closure of its healthcare clinics and virtual health business in the quarter, which resulted in a 2-cent earnings per share adjustment. McMillon said in the earnings call that the cost to run the clinics was a losing battle given low insurance reimbursement rates. He said Walmart will continue to focus on expanding its pharmacy services in the growing category of health and wellness, which posted comp sales in the high-single digits for the quarter.

SAM’S CLUB
The Sam’s Club results included net revenue of $21.4 billion, up 4.9% year over year. Operating income grew 34% to $615 million. Comp sales rose 4.4% with transactions up 5.4% and average tickets down 1% in the quarter. E-commerce added 1.8% to the overall comp. E-commerce sales grew 18%, led by club-fulfilled curbside and delivery.

Sam’s Club CEO Chris Nicholas attributed the strong comp growth to gains in food and consumables while also gaining market share in grocery. He said the private brand Members Mark grew by high-single digits in the quarter.

Inventory also declined by 4.9% despite sustained strong sales and higher in-stock levels. One year ago, Sam’s took a large inventory charge, which hurt profits. Nicolas said better inventory management resulted in fewer markdowns and an uptick in gross profits.

Membership income increased 13.3%, with record total membership and Plus penetration at the quarter end.

INTERNATIONAL
The diverse international business reported revenue of $29.8 billion, up 12.1% year over year. Operating income totaled $1.5 billion, up 31.7%. Walmart said the sales growth was led by Walmex, China and Flipkart, which contributed 10.7% of the gain.

E-commerce sales rose 19%, led by store-fulfilled pickup and delivery and marketplace. The segment also benefited from a 27% increase in advertising revenue led by Flipkart and Walmex, and improved e-commerce margins. Inventory was up 3.7% due to 170 new stores opened in the past 12 months.

Walmart International CEO Kath McLay said the solid revenue results also benefited from lapping the year of China’s reopening post-COVID, an extraordinary event that won’t likely be repeated.

LOOK AHEAD
Walmart provided second-quarter guidance of earnings per share between 62 cents and 65 cents and consolidated operating income growth between 3% and 4.5%. Revenue is forecast to grow between 3.5% and 4.5%.

Walmart execs admitted the guidance might be a bit cautious. But McMillon said Walmart is executing on all cylinders while growing earnings over revenue.

Ben Bienvenu, an analyst with Stephens Inc., remains bullish on Walmart following the strong quarter. He said the business continues to demonstrate its strong positioning in the market, underpinned by solid execution from the management team. Brian Jacobson, the chief economist at Annex Wealth Management, said the fact that sales grew because of volume and not just price was a positive in the quarter. He said that was also driven in part by more wealthier consumers doing the heavy lifting.

Investors also liked the results, pushing Walmart’s share price higher in early trading on Thursday. Walmart (NYSE: WMT) opened at $64.22, up $4.39 over the prior day’s closing. At mid-morning, the shares were priced around $63.85, up $4.01 or 6.7%.