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Walmart (WMT) Q3 Earnings Match Estimates, Guidance Raised
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Walmart Inc. (WMT - Free Report) came out with impressive third-quarter results, wherein both the top and bottom lines increased year over year, and revenues beat the Zacks Consensus Estimate. Revenues grew across all segments, and management remains encouraged about the holiday season. Encouragingly, Walmart raised net sales growth and adjusted earnings per share (EPS) guidance for fiscal 2024 yet again.
Quarter in Detail
Walmart’s adjusted earnings of $1.53 per share increased 2% from the year-ago period’s figure of $1.50. The metric came in line with the Zacks Consensus Estimate.
Total revenues of $160.8 billion grew 5.2% year over year and beat the consensus mark of $159.5 billion. The top line was positively impacted by currency movements to the tune of $1.4 billion. On a constant-currency (cc) basis, total revenues climbed 4.3%. The company witnessed growth in all segments.
E-commerce sales surged 15% globally on pickup and delivery. E-commerce net sales formed 15% of WMT’s overall net sales. Walmart witnessed a solid increase in membership income.
The consolidated gross profit margin expanded 32 basis points (bps) to 24% due to a slight gain at Walmart U.S. and the favorable timing of Flipkart’s The Big Billion Days (“BBD”) event.
The adjusted operating income increased 3% to $6.2 billion. Consolidated adjusted operating expenses as a percentage of sales increased by 37 bps year over year due to store remodels and variable pay costs.
WMT’s global advertising business increased around 20%.
Segment Details
Walmart U.S.: The segment’s net sales grew 4.4% to $109.4 billion in the reported quarter. The Zacks Consensus Estimate for the segment sales was pegged at $108.1 billion. U.S. comp sales, excluding fuel, improved by 4.9% due to a 1.5% increase in the average ticket and transaction growth of 3.4%. Sales growth was backed by strength in store and digital transactions.
The segment experienced gains from grocery and health & wellness, partly offset by softness in general merchandise. The company continued to see robust share gains in grocery. E-commerce boosted comps by 300 bps. E-commerce sales in the segment rose 24%, driven by strength in pickup & delivery. As of the third quarter, Walmart U.S. had nearly 4,600 pickup locations and more than 4,200 same-day delivery stores. The company remodeled 233 stores during the reported quarter.
The operating income of the Walmart U.S. segment dipped 2.2% to $5 billion.
Walmart International: The segment’s net sales rose 10.8% to $28 billion. The consensus mark stood at $27.9 billion. Currency movements had a $1.4-billion positive impact. On a cc basis, net sales jumped 5.4% to $26.7 billion. Sales were driven by Walmex and China. Segment e-commerce sales dipped 3% due to the shift of Flipkart’s BBD event into the fourth quarter. The operating income, on a cc basis, grew 10.7% to $1 billion.
Sam’s Club U.S.: The segment, which comprises membership warehouse clubs, witnessed a net sales increase of 3.2% to $18.9 billion (excluding fuel). Sam’s Club’s comp sales, excluding fuel, grew 3.8%, while the consensus mark was pegged at nearly 2.9%. While transactions grew 4%, the average ticket fell 0.2%. Comp sales saw strength in food and consumables and healthcare.
The membership income climbed 7.2% in the quarter. The Plus penetration rate continued to rise. E-commerce fueled comps by 170 bps. E-commerce net sales jumped 16% at Sam’s Club U.S. on ro bust curbside and delivery. The segment’s operating income came in at $0.6 billion, up 5.5% year over year.
Other Financial Updates & Developments
Walmart ended the quarter with cash and cash equivalents of $12.9 billion and total debt of $55.4 billion.
Year to date, WMT has generated operating cash flow of $19 billion and free cash flow of $4.3 billion. In fiscal 2024, capital expenditures are likely to come between flat and slightly up compared with fiscal 2023.
Walmart repurchased 8.7 million shares for $1.3 billion year to date. As of the third-quarter earnings release, the company had $18.1 billion remaining under its share buyback plan.
FY24 Guidance
For fiscal 2024, Walmart now expects consolidated net sales growth of 5-5.5% at cc compared with the previous view of 4-4.5% growth.
Management expects the consolidated operating income to increase roughly 7-7.5% at cc, including a 70-bps positive impact of LIFO.
Management anticipates net interest expenses to escalate by approximately $300 million from the year-ago period. The effective tax rate is likely to be approximately 26.5%. The company also expects the noncontrolling interest to be a roughly 27-cent headwind to the EPS.
Management now envisions an adjusted EPS in the band of $6.40-$6.48, up from the earlier range of $6.36-$6.46. The bottom-line view includes an anticipated positive LIFO impact of 3 cents. WMT posted an adjusted EPS of $6.29 in fiscal 2023.
Shares of the Zacks Rank #3 (Hold) company have surged 21.1% year to date compared with the industry’s growth of 17.7%.
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The Zacks Consensus Estimate for Ross Stores’ current financial-year sales and earnings indicates growth of 7.1% and 19.6%, respectively, from the year-ago reported numbers.
The off-price retailer, The TJX Companies (TJX - Free Report) , holds a Zacks Rank #2 at present.
The Zacks Consensus Estimate for The TJX Companies’ current financial-year EPS suggests growth of 19.6% from the year-ago reported figure. TJX has a trailing four-quarter earnings surprise of 6.6%, on average.
Abercrombie & Fitch (ANF - Free Report) , a specialty retailer, currently has a Zacks Rank #2.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 10.3% from the year-ago reported numbers. ANF has a trailing four-quarter earnings surprise of 724.8%, on average.
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Walmart (WMT) Q3 Earnings Match Estimates, Guidance Raised
Walmart Inc. (WMT - Free Report) came out with impressive third-quarter results, wherein both the top and bottom lines increased year over year, and revenues beat the Zacks Consensus Estimate. Revenues grew across all segments, and management remains encouraged about the holiday season. Encouragingly, Walmart raised net sales growth and adjusted earnings per share (EPS) guidance for fiscal 2024 yet again.
Quarter in Detail
Walmart’s adjusted earnings of $1.53 per share increased 2% from the year-ago period’s figure of $1.50. The metric came in line with the Zacks Consensus Estimate.
Walmart Inc. Price, Consensus and EPS Surprise
Walmart Inc. price-consensus-eps-surprise-chart | Walmart Inc. Quote
Total revenues of $160.8 billion grew 5.2% year over year and beat the consensus mark of $159.5 billion. The top line was positively impacted by currency movements to the tune of $1.4 billion. On a constant-currency (cc) basis, total revenues climbed 4.3%. The company witnessed growth in all segments.
E-commerce sales surged 15% globally on pickup and delivery. E-commerce net sales formed 15% of WMT’s overall net sales. Walmart witnessed a solid increase in membership income.
The consolidated gross profit margin expanded 32 basis points (bps) to 24% due to a slight gain at Walmart U.S. and the favorable timing of Flipkart’s The Big Billion Days (“BBD”) event.
The adjusted operating income increased 3% to $6.2 billion. Consolidated adjusted operating expenses as a percentage of sales increased by 37 bps year over year due to store remodels and variable pay costs.
WMT’s global advertising business increased around 20%.
Segment Details
Walmart U.S.: The segment’s net sales grew 4.4% to $109.4 billion in the reported quarter. The Zacks Consensus Estimate for the segment sales was pegged at $108.1 billion. U.S. comp sales, excluding fuel, improved by 4.9% due to a 1.5% increase in the average ticket and transaction growth of 3.4%. Sales growth was backed by strength in store and digital transactions.
The segment experienced gains from grocery and health & wellness, partly offset by softness in general merchandise. The company continued to see robust share gains in grocery. E-commerce boosted comps by 300 bps. E-commerce sales in the segment rose 24%, driven by strength in pickup & delivery. As of the third quarter, Walmart U.S. had nearly 4,600 pickup locations and more than 4,200 same-day delivery stores. The company remodeled 233 stores during the reported quarter.
The operating income of the Walmart U.S. segment dipped 2.2% to $5 billion.
Walmart International: The segment’s net sales rose 10.8% to $28 billion. The consensus mark stood at $27.9 billion. Currency movements had a $1.4-billion positive impact. On a cc basis, net sales jumped 5.4% to $26.7 billion. Sales were driven by Walmex and China. Segment e-commerce sales dipped 3% due to the shift of Flipkart’s BBD event into the fourth quarter. The operating income, on a cc basis, grew 10.7% to $1 billion.
Sam’s Club U.S.: The segment, which comprises membership warehouse clubs, witnessed a net sales increase of 3.2% to $18.9 billion (excluding fuel). Sam’s Club’s comp sales, excluding fuel, grew 3.8%, while the consensus mark was pegged at nearly 2.9%. While transactions grew 4%, the average ticket fell 0.2%. Comp sales saw strength in food and consumables and healthcare.
The membership income climbed 7.2% in the quarter. The Plus penetration rate continued to rise. E-commerce fueled comps by 170 bps. E-commerce net sales jumped 16% at Sam’s Club U.S. on ro bust curbside and delivery. The segment’s operating income came in at $0.6 billion, up 5.5% year over year.
Other Financial Updates & Developments
Walmart ended the quarter with cash and cash equivalents of $12.9 billion and total debt of $55.4 billion.
Year to date, WMT has generated operating cash flow of $19 billion and free cash flow of $4.3 billion. In fiscal 2024, capital expenditures are likely to come between flat and slightly up compared with fiscal 2023.
Walmart repurchased 8.7 million shares for $1.3 billion year to date. As of the third-quarter earnings release, the company had $18.1 billion remaining under its share buyback plan.
FY24 Guidance
For fiscal 2024, Walmart now expects consolidated net sales growth of 5-5.5% at cc compared with the previous view of 4-4.5% growth.
Management expects the consolidated operating income to increase roughly 7-7.5% at cc, including a 70-bps positive impact of LIFO.
Management anticipates net interest expenses to escalate by approximately $300 million from the year-ago period. The effective tax rate is likely to be approximately 26.5%. The company also expects the noncontrolling interest to be a roughly 27-cent headwind to the EPS.
Management now envisions an adjusted EPS in the band of $6.40-$6.48, up from the earlier range of $6.36-$6.46. The bottom-line view includes an anticipated positive LIFO impact of 3 cents. WMT posted an adjusted EPS of $6.29 in fiscal 2023.
Shares of the Zacks Rank #3 (Hold) company have surged 21.1% year to date compared with the industry’s growth of 17.7%.
Solid Retail Picks
Here, we have highlighted three better-ranked stocks.
Ross Stores (ROST - Free Report) , which operates off-price retail apparel and home fashion stores, currently carries a Zacks Rank #2 (Buy). ROST has a trailing four-quarter earnings surprise of 11.4%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
The Zacks Consensus Estimate for Ross Stores’ current financial-year sales and earnings indicates growth of 7.1% and 19.6%, respectively, from the year-ago reported numbers.
The off-price retailer, The TJX Companies (TJX - Free Report) , holds a Zacks Rank #2 at present.
The Zacks Consensus Estimate for The TJX Companies’ current financial-year EPS suggests growth of 19.6% from the year-ago reported figure. TJX has a trailing four-quarter earnings surprise of 6.6%, on average.
Abercrombie & Fitch (ANF - Free Report) , a specialty retailer, currently has a Zacks Rank #2.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 10.3% from the year-ago reported numbers. ANF has a trailing four-quarter earnings surprise of 724.8%, on average.