Walmart posts quarterly gains in revenue, net income; raises full year guidance

Walmart again outperformed analyst expectations for a better-than-anticipated fiscal third quarter while also painting a rosy picture for the fiscal year. The Bentonville-based retail giant posted quarterly revenue of $169.588 billion, up 5.5% from a year ago.

Net income in the quarter was $4.577 billion, well ahead of the $453 million in the same quarter of 2023. Adjusted earnings per share totaled 58 cents in the quarter, versus 51 cents a year ago following adjustments for the stock split that occurred earlier this year. Adjusted earnings per share grew 13.7% and ahead of consensus estimates by 5 cents.

“We had a strong quarter, continuing our momentum,” CEO Doug McMillon said. “In the U.S., in-store volumes grew, pickup from store grew faster, and delivery from store grew even faster than that.”

For the first nine months of the fiscal year, Walmart reported total revenue of $500.431 billion, up 5.4% year over year. Net income was $14.182 billion in the first nine months, up 41.6% from a year ago with strength in all three of the operating segments.

Stronger than anticipated results prompted Walmart to hike its fiscal year guidance for the third time this year. Net sales are forecast to range between 4.8% to 5.1% for the full year, up from the 3% to 4% forecast to start the year. Earnings are forecast to rise between $2.42 to $2.47 per share for the year, up 7% at the low-end of the range.

U.S. STORES 
Walmart U.S. had net sales of $114.9 billion, up 5% from a year ago. Comp sales, excluding fuel, rose 5.3%, well ahead of expectations. Transactions grew 3.1% and average tickets rose 2.1%. Strong e-commerce sales added 2.9% to overall comp. U.S. e-commerce sales jumped 22% in the quarter.

Operating income grew by $500 million in the period amid lower inventory and store execution as well as 26% growth in Walmart’s advertising business. Walmart also saw double-digit growth in membership income and lower losses related to the e-commerce business.

The retail giant said it benefited from gains across all product categories and income demographics, primarily driven by upper-income households. Food sales grew around 6%, led by dry grocery with gains in personal care and household cleaning categories. Walmart said its BetterGoods private brand rollout continues and sales are trending ahead of projections. Grocery comprises about 60% of Walmart’s U.S. sales.

WALMART INTERNATIONAL, SAM’S CLUB
The diverse international business reported revenue of $30.3 billion. Revenue grew 8% year over year with strength in WalMex, China and Flipkart in India. Revenue was bolstered by a forward shift in Big Billion Days sales with Flipkart in India that occurred in the fourth quarter of last year.

Operating income improved to $31.5 billion, up 12.4% from a year ago, growing across most markets and benefiting from lower e-commerce losses. E-commerce sales rose 43% year over year, led by marketplace and store-fulfilled pickup and delivery orders. The international advertising business rose 50%, again led by Flipkart.

Sam’s Club net sales revenue totaled $22.9 billion, up 3.9% including fuel. Sam’s Club said sales growth in clubs and online was led by food and health and wellness categories. The business also picked up market share gains in grocery and general merchandise, including apparel and electronics in the quarter.

E-commerce sales climbed 26% and membership income rose 15% from a year ago. Lower operating expenses help to boost the gross profit rate by 0.47% in the quarter. Operating income rose 6.9% to $600 million in the quarter. Membership income grew 7.2% and advertising revenue increased 27% from a year ago.

ANALYST COMMENTS
The earnings report came as no surprise to Kate McShane of Goldman Sachs who said Walmart has maintained an edge in value, offering prices that are about 10% to 12% cheaper for an average basket of food against competitors. She said Walmart continues to grow margins and profitability which should drive improved earnings for the longer term.

Matt Boss, the equity research manager at J.P. Morgan, said nearly 50% of the consumption in the U.S. is coming from higher-income groups, but even they are looking for value as noted in Walmart’s share gains.

Simeon Gutman, an analyst at Morgan Stanley, said there is a shift underway in retail where the big keep getting bigger and the winners are taking more, with Walmart and Costco leading the way. He said Walmart’s ancillary businesses of advertising, data analytics, third-party marketplace and logistics services are a huge advantage over smaller players.

With respect to holiday sales, Telsey Advisory Group said Walmart will be a big winner.

“We also expect a continued solid contribution from the company’s higher engagement with upper-income households,” Telsey’s Joseph Feldman said. “This should be partly offset by disinflation/deflation in select categories and ongoing pressure from the challenging consumer spending environment.”

Walmart execs said holiday sales were off to a good start and they are looking for solid results from the U.S. segment, Walmex and Sam’s Club China as well as Sam’s U.S.

The Walmart share price is up 64% since the start of this year. Walmart shares (NYSE: WMT) rallied on the strong results Tuesday gaining more than 3% in early trading. Over the past 52 weeks shares have traded between $47.85 and $87.88. The high mark was recorded earlier in the day following the earnings announcement.

Also in the quarter, Walmart repurchased 12.6 million shares totaling $1 billion and paid out $1.7 million in dividends to investors.