When the economy slows and inflation is high, it’s often Walmart’s (WMT) time to shine.
And Walmart delivered on that old saw in the first quarter.
The world’s largest retailer reported first-quarter same-store sales growth that beat expectations as consumers traded down from traditional supermarkets and slowed purchases of discretionary merchandise from rivals like Target (TGT).
Walmart shares rose 2% in early trading.
The company also raised its full-year earnings per share forecast to a range of $6.10-$6.20 per share, up from its prior expectations for earnings to come in at $5.95-$6.05 per share in its fiscal year.
“It’s a great time to be a merchant,” Walmart CEO Doug McMillon told analysts on a conference call. “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 in both businesses.”
Earnings rundown
- Net Sales: +7.6% year over year to $152.3 billion vs. estimates for $148.7 billion
- Total US Same-Store Sales: +7.4% vs. estimates for +5.1%
- Gross Profit Margin: 23.7% vs. 23.8% a year ago and estimates for 23.64%
- Inventory Growth: -7% year over year vs. estimates for -7.1%
- Diluted EPS: $1.47 vs. estimates for $1.31
What else caught our attention
- Good: Inventory fell 7% from the prior year; Online sales up in all divisions (Target’s online sales fell 3.4% in the quarter); Big quarter out of China amid economic re-opening.
- Not So Good: Second-quarter earnings per share are seen in a range of $1.63-$1.68 vs. $1.70 expected; Walmart called out double-digit percentage food inflation; Noted sales “moderated” as quarter progressed.
- Mixed: Full-year earnings per share seen in a range of $6.10 to $6.20 (previous: $5.90 to $6.05) vs. $6.14 estimate.
What Wall Street is saying on Walmart
- Bank of America (Buy rating): “We reaffirm our buy on Walmart and continue to see the company well-positioned in Fy24 given likely continued strength in grocery supported by strong price positioning, private label and omni-channel. Moreover, Walmart’s relatively lower exposure to discretionary general merch. vs. peers like Target implies less risk from a top line perspective in a softer macro environment as well as from a margin/mix shift standpoint. We believe Walmart’s stores as DCs [distribution centers] strategy is driving Walmart’s first-party e-commerce business towards profitability in addition to helping form the growth of Walmart’s highly profitable digital advertising (now $2.7 billion globally) and third-party marketplace businesses.” -Analyst Robert Ohmes
- Fitch: “Walmart’s strong 1Q report and earnings beat are evidence of its improving execution and widening competitive gap around omnichannel initiatives and supply chain efficiency. The company’s share gains despite its already massive scale demonstrate its success in attracting new consumers and deepening its relationship to existing customers. The company recently outlined plans to grow revenue 4% annually from its sizable base of over $600 billion; producing 7.6% sales growth in a quarter marked by decelerating consumer spending on goods raises confidence in Walmart’s ability to achieve that goal over the next few years.” -Senior Director Fitch Ratings, David Silverman.