Walmart Quarterly Profit Beats, Revenues Miss

by Ike Obudulu Posted on May 16th, 2019

Bentonville, Arkansas: Retail giant Walmart Inc. (NYSE: WMT) on Thursday reported an 80 percent surge in profit for the first quarter from last year, reflecting higher revenues and a gain on the company’s equity investment in JD.com.

Excluding items, adjusted earnings per share for the quarter beat analysts’ expectations, while revenues missed their estimates. The company’s shares are gaining more than 1 percent in pre-market activity.

For the first quarter, consolidated net income attributable to Walmart rose to $3.84 billion or $1.33 per share from $2.13 billion or $0.72 per share in the same period last year.

The latest quarter’s results include an unrealized gain, net of tax, of $0.20 per share on the company’s equity investment in JD.com.

Excluding items, adjusted earnings for the quarter were $1.13 per share, compared to $1.14 per share in the year-ago period. On average, analysts polled by Thomson Reuters expected the company to report earnings of $1.02 per share. Analysts’ estimates typically exclude special items.

Total revenue for the quarter, comprising net sales and Membership and other income, grew 1.0 percent to $123.93 billion from $122.69 billion in the year-ago period. Excluding currency, total revenue increased 2.5 percent. Analysts were looking for revenues of $124.98 billion for the quarter.

Net sales grew 1.1 percent to $122.95 billion, while Membership and other income declined 7.9 percent to $976 million.

Walmart U.S. comp sales increased 3.4 percent, marking the best first-quarter comp in nine years and the fourth consecutive quarter above 3 percent. Net sales rose 3.3 percent to $80.3 billion. Walmart U.S. eCommerce sales grew 37 percent.

Sam’s Club comp sales increased 0.3 percent. Reduced tobacco sales negatively impacted comp sales by about 270 basis points.

Meanwhile, net sales at Walmart International declined 4.9 percent to $28.8 billion.

Walmart said its e-commerce sales in the U.S. grew 37% during the quarter, driven by strong growth in online grocery and its home and fashion categories on Walmart.com.

“We’re changing to enable more innovation, speed and productivity, and we’re seeing it in our results,” CEO Doug McMillon said in a statement. “We’re especially pleased with the combination of comparable sales growth from stores and eCommerce in the U.S. Our team is demonstrating an ability to serve customers today while building new capabilities for the future, and I want to thank them for a strong start to the year.”

Grocery has been a bright spot for Walmart’s e-commerce strategy. At the end of the quarter, Walmart has 2,450 stores with grocery pickup in the U.S. and nearly 1,000 locations with delivery. The retailer expects to offer grocery pickup at 3,100 of its stores and delivery at 1,600 of those locations by year-end.

With competition intensifying with retail giant Amazon (AMZN), Walmart announced this week that it will roll out next day delivery without a membership fee for orders of $35 and more. The offering will begin in Phoenix and Las Vegas before expanding to Southern California and gradually reaching 75% of the U.S. population, the retailer said.

Tariff threat

Elsewhere, the retailer said it’s watching the tariff situation as trade tensions increase between the U.S. and China.

“We’re monitoring the tariff discussions and are hopeful that an agreement can be reached,” CFO Brett Biggs said in a statement. “Our goal is to always be the low-price leader, and we will actively manage pricing and margins as warranted with our customers and shareholders in mind. Our merchant teams have been focused on this for months and continue to execute appropriate mitigation strategies.”

On a call with reporters, Biggs said tariffs would result in higher prices for shoppers.

“We are going to continue to do everything we can to keep prices low. However, increased tariffs will lead to increased prices for our customers,” he said.

Walmart U.S. CEO Greg Foran said its merchants will use “appropriate mitigation strategies” for the tariff threat and will manage costs “on an item by item basis.”

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