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Walmart (WMT) Q1 Earnings Beat, E-Commerce Penetration Grows

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Walmart Inc. (WMT - Free Report) began fiscal 2025 on a bright note, with the first-quarter top and bottom lines growing year over year and surpassing the Zacks Consensus Estimate. Revenues rose across all segments, and the company’s e-commerce penetration increased in all markets due to store-fulfilled pickup & delivery and marketplace.

Encouragingly, management anticipates being at the upper end or slightly higher than its earlier net sales, adjusted operating income and adjusted earnings per share (EPS) guidance for fiscal 2025.

Quarter in Detail

Walmart’s adjusted earnings of 60 cents per share jumped 22.4% from the year-ago period’s figure of 49 cents. The metric came ahead of the Zacks Consensus Estimate of 52 cents.

Total revenues    of $161.5 billion grew 6% year over year, which beat the consensus mark of $159.5 billion. On a constant-currency (cc) basis, total revenues climbed 5.8%. Revenues were backed by strength across all operating segments. Additionally, the leap year contributed 1% to growth.

Global e-commerce sales surged 21% on store-fulfilled pickup & delivery and marketplace. Walmart witnessed a solid increase in membership income. WMT’s global advertising business advanced by around 24%.

The consolidated gross profit margin expanded 42 basis points (bps) to 24.1%, with growth across all segments, especially Walmart U.S. The gross margin expansion was backed by pricing efforts, reduced markdowns and the improved business mix. Adjusted operating expenses deleveraged 24 bps.

The adjusted operating income increased 13.7% to $7.1 billion due to greater gross margin and higher membership income, somewhat negated by expense deleverage.

Walmart Inc. Price, Consensus and EPS Surprise

Walmart Inc. Price, Consensus and EPS Surprise

Walmart Inc. price-consensus-eps-surprise-chart | Walmart Inc. Quote

Segment Details

Walmart U.S.: The segment’s net sales grew 4.6% to $108.7 billion in the reported quarter. U.S. comp sales, excluding fuel, improved by 3.8% due to transaction growth of 3.8%, while the average ticket remained flat year over year. Sales growth was backed by strength in transactions and higher unit volumes.

WMT witnessed continued share gains fueled by higher-income households. While grocery and health & wellness saw higher comp sales, the general merchandise category witnessed a decline. E-commerce boosted comps by 280 bps. E-commerce sales in the segment rose 22%, driven by the same factors that drove the overall company’s e-commerce sales. Segment gross margin benefited from the same factors driving Walmart’s overall gross margin, partly offset by category mix pressure stemming from lower general merchandise sales.

As of the first quarter, Walmart U.S. had nearly 4,600 pickup locations and about 4,300 same-day delivery stores. The company remodeled 63 stores during the reported quarter. The adjusted operating income of the Walmart U.S. segment jumped 9.6% to $5.5 billion.

Walmart International: The segment’s net sales rose 12.1% to $29.8 billion. On a cc basis, net sales jumped 10.7%, driven by Walmex, China and Flipkart. The company witnessed strength in food and consumables, along with better growth in general merchandise. The growth of higher-margin services and reduced supply-chain costs drove the gross margin expansion.

During the quarter, Walmart introduced 12 new stores. Segment e-commerce sales went up 19% due to the same factors that drove the overall company’s e-commerce sales. E-commerce penetration expanded across markets. The operating income, on a cc basis, grew 27.2% to $1.5 billion.

Sam’s Club U.S.: The segment, which comprises membership warehouse clubs, witnessed a net sales increase of 5.3% to $18.7 billion (excluding fuel). Sam’s Club’s comp sales, excluding fuel, grew 4.4%. While transactions grew 5.4%, the average ticket fell 1%. Comp sales were driven by strength in food, consumables as well as health & wellness.

The membership income remained strong, up 13.3% in the quarter. The Plus penetration rate continued to rise. E-commerce fueled comps by 180 bps. E-commerce net sales jumped 18% at Sam’s Club U.S. on club-fulfilled curbside and delivery strength. The segment’s operating income came in at $0.6 billion, up 34.3% year over year.

Other Financial Updates & Developments

Walmart ended the quarter with cash and cash equivalents of $9.4 billion and total debt of $50.1 billion.

In the first quarter, WMT generated operating cash flow of $4.2 billion and free cash flow of negative $0.4 billion. In fiscal 2025, capital expenditures are likely to form nearly 3-3.5% of net sales.

Walmart repurchased 18 million shares for $1.1 billion in the first quarter. As of the first-quarter earnings release, the company had $15.5 billion remaining under its share buyback plan.

FY25 Guidance

For fiscal 2025, Walmart expects consolidated net sales growth in the upper end or slightly higher than its earlier view of 3-4% at cc. Likewise, consolidated operating income growth is expected to come at the upper end or slightly above the previously guided range of 4-6% at cc.

Net interest expenses are likely to escalate by approximately $100-$200 million from the year-ago period.

Again, Walmart envisions adjusted EPS for fiscal 2025 to come in the upper end or slightly higher than its prior guidance range of $2.23-$2.37 compared with $2.22 recorded in fiscal 2024.

Q2 Guidance

For the second quarter of fiscal 2025, the company anticipates consolidated net sales to increase 3.5-4.5% at cc. Consolidated operating income is expected to rise 3-4.5% at cc. Management envisions adjusted EPS in the band of 62-65 cents.

Shares of this Zacks Rank #3 (Hold) company have risen 15.5% in the past six months compared with the industry’s growth of 16.6%.

Better-Ranked Retail Picks

Here, we have highlighted three better-ranked stocks.

The TJX Companies (TJX - Free Report) , an off-price retailer, currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for TJX’s current financial-year sales and earnings suggests respective growth of 3.9% and 9% from the year-ago reported numbers. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The TJX Companies has a trailing four-quarter earnings surprise of around 6.3%, on average.

Tractor Supply (TSCO - Free Report) , a rural lifestyle retailer, currently carries a Zacks Rank #2. The Zacks Consensus Estimate for TSCO’s current financial-year sales and earnings indicates respective growth of around 3% and 2.4% from the year-ago reported number.

Tractor Supply has a trailing four-quarter earnings surprise of 2.7%, on average.

Abercrombie & Fitch (ANF - Free Report) , a specialty retailer, currently has a Zacks Rank #2. The Zacks Consensus Estimate for ANF’s current financial-year sales and earnings suggests growth of 5.9% and 20.1%, respectively, from the year-ago reported numbers.

Abercrombie & Fitch has a trailing four-quarter earnings surprise of around 715.6%, on average.

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