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Walmart's (WMT) Q1 Earnings & Sales Jump Y/Y, Online Sales Up

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Walmart Inc. (WMT - Free Report) posted first-quarter fiscal 2019 results, wherein both earnings and revenues improved year over year and exceeded the Zacks Consensus Estimate. With this, Walmart reverted to its positive earnings surprise track, after delivering a miss in the fourth quarter. Also, the company’s U.S. comparable-store sales (comps) increased for the 15th straight period.

Walmart has long been gaining from its constant efforts to combat the growing dominance of Amazon AMZN. In this regard, the company recently clinched contracts to buy a 77% stake in Flipkart, which is expected to hurt its bottom line for a while. This has made investors somewhat apprehensive about this Zacks Rank #4 (Sell) stock that has lost 17.2% in three months, compared to the industry’s decline of 16.8%.


Quarter in Detail

Walmart’s adjusted earnings of $1.14 per share came ahead of the Zacks Consensus Estimate of $1.12 and surged 14% year over year. Including one-time items, earnings slumped 28% to 72 cents per share.


Walmart Inc. Price, Consensus and EPS Surprise


Walmart Inc. Price, Consensus and EPS Surprise | Walmart Inc. Quote


Total revenues advanced 4.4% to $122.7 billion that surpassed the Zacks Consensus Estimate of nearly over $120 billion. The upside was driven by strength at the U.S. and international businesses. On a currency-neutral basis, total revenues advanced 2.7% to $120.7 billion.

Consolidated operating income slipped 1.6% to approximately $5.2 billion, whereas the operating income margin contracted 200 basis points to 4.2%. On a constant currency basis, operating income declined 4% to roughly $5 billion.

Segment Details

Walmart U.S.: The segment recorded net sales growth of 3.1% to $77.7 billion in the quarter. U.S. comps, excluding fuel, jumped 2.1%, compared with 1.4% growth in the prior-year quarter While comp traffic improved 0.8%, average ticket inched up 1.3% in the quarter. Moreover, e-commerce sales positively impacted quarterly comp sales at Walmart U.S. by 100 bps.

Notably, e-commerce sales in the segment jumped 33%, much better than a 23% rise reported in the fourth quarter. E-commerce sales in the first quarter improved on the back of strength across and online grocery, keeping management encouraged about achieving 40% growth in fiscal 2019. Operating income at the segment dipped 3.1% to over $3.9 billion.

Walmart International: Segment net sales went up by 11.7% to $30.3 billion. On a currency-neutral basis, net sales improved 4.5% to $28.3 billion, gaining largely from solid Walmex performance. In fact, eight out of 11 markets delivered favorable comps, including four of Walmart’s largest markets.  Further, operating income rose 11.1% to $1.3 billion. On a constant currency basis, it inched up by 0.2% to $1.1 billion.

Sam’s Club: The segment, which comprises membership warehouse clubs, saw its net sales decline 2.7% to $13.6 billion. Sam’s Club comps, excluding fuel, rose 3.8%, higher than 1.6% growth recorded in the prior-year quarter. However, comps were hurt to an extent of about 140 bps from lower tobacco sales.

Comps were backed by traffic that grew 5.6%, while ticket dipped 1.8%. E-commerce sales positively impacted comps by approximately 100 basis points in the quarter. The segment generated an operating income of $0.3 million, down 18.5% year over year.

Other Financial Updates

Walmart ended the quarter with cash and cash equivalents of roughly $7,885 million, long-term debt of nearly $29,477 million, long-term capital lease and financing obligations of $6,828 million and shareholders’ equity (excluding noncontrolling interest) of $75,552 million.

In the first quarter of 2018, Walmart generated cash flow from operations of $5.2 billion and incurred capital expenditures of $1.8 billion, resulting in free cash flow of $3.3 billion. Walmart paid $1.5 billion in dividends and made share buybacks worth $0.5 billion during the quarter.

Recent Developments & View

Apart from announcing investments in Flipkart, Walmart recently unveiled intentions to combine its UK grocery unit, Asda with J Sainsbury. Additionally, the company plans to divest its banking operations in Walmart Chile and Walmart Canada.

Overall, management remains pleased with the solid start to fiscal 2019 and is on track to further strengthen its digital operations and enhance its business portfolio. However, management expects investment in Flipkart to dent fiscal 2019 earnings per share by 25-30 cents, if the deal is concluded at the end of the second quarter.

Retail Stocks You Can’t Miss

Dollar General DG, with a Zacks Rank #2 (Buy) has a long-term earnings per share growth rate of 14.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

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