Walmart executives expressed cautious optimism Thursday that the company is prepared to pivot as necessary to meet customer demand in a year filled with uncertainty.
Although quarterly sales rose 5.2% to $160.8 billion, some of the headwinds retailers could face in the fourth quarter and beyond include student loan repayments, potential deflation and political instability overseas. listed.
Walmart reported net income of $453 million, or 17 cents per share, for the quarter ended Oct. 31, compared with a net loss of $1.8 million, or 66 cents per share, in last year’s third quarter. was.
Walmart’s earnings per share fell short of the average estimate of $1.52 from Yahoo Finance’s 29 analysts. However, adjusting for losses from stocks and other investments, his earnings per share are $1.53.
Doug McMillon, president and chief executive officer of Walmart, said on a conference call with retail analysts that the Bentonville-based retailer saw strong revenue growth across its divisions this quarter.
“Looking to the future, our inventory is in good shape,” McMillon said, with discounts on toys, clothing, electronics, seasonal decor and more. As the Christmas shopping season approaches, “Our teams are focused and our employees are ready to serve you whenever and however you want.” Inflation has limited consumers’ spending on essentials. Meanwhile, sales of general merchandise are sluggish. But McMillon said prices for these items, which include popular gift items such as toys, electronics and technology, have fallen.
“This allows us to lower prices,” he said, which is important for families during the Christmas shopping season.
McMillon said Walmart’s U.S. operations could weather a period of deflation, or falling prices, in the coming months. He said this would put pressure on retailers to sell more products, but “we welcome it because it’s better for customers.” Carol Spiekerman, a retail consultant and president of Spiekerman Retail, said Wal-Mart wants to win, saying, “A disproportionate increase in low-margin groceries and a stagnation in high-margin general merchandise is a challenge for Wal-Mart.” “It’s an ongoing frustration.”
On a positive note, Spiekerman said, “Walmart could play a more aggressive pricing game over the holidays as general merchandise inflation eases.” “While overall sales may decline due to deflation, Walmart could benefit from increased visibility across its business,” Spickerman said. “Walmart may be in for a pleasant surprise during the holiday season.” Walmart shares continued to rise strongly for several days, hitting a record high of $169.94 on Wednesday before falling 8.1%, or $13.74, on Thursday. It closed at $156.04 on the New York Stock Exchange. The company’s stock has traded between $136.09 and $169.94 over the past year.
Walmart released its earnings report before the U.S. market opened.
“Given the Wal-Mart results, Wall Street’s initial reaction seems extreme,” Spickerman said.
Brian Yarbrough, a retail analyst at financial services firm Edward Jones, said Walmart had a strong quarter. But he said Walmart’s adjusted profit slightly exceeded expectations as expectations were building for the company’s earnings release.
“If stocks were priced perfectly, you would see results like this,” Yarbrough said.
All retailers are nervous about this year’s Christmas shopping season, he said.
“During COVID-19, everyone was buying products, and now it’s travel and entertainment,” Yarbrough said. He said the economy has moved from pandemic mode to inflation, plus student loan repayments have resumed and savings from the Corona Fund have been depleted.
“There are so many headwinds for consumers,” Yarbrough said. He said retailers are also monitoring consumers’ financial situations and planning carefully.
Mr. Spickerman has a different view.
“The tone of Walmart’s report was subdued, but I don’t attribute that to concern or extreme caution,” Spickerman said. “Walmart is clearly playing the long game, investing now in technology and upgrades that will pay dividends over time.” Net sales increased 4.4% from the same period last year to $109.4 billion. The company said sales were driven by the grocery and health and wellness categories, but general merchandise sales declined “moderately.”
Sales at stores open for at least a year, excluding fuel, increased by 4.9%. These sales numbers, also known as same-store sales or comp sales, are considered a key indicator of a retailer’s health.
Comp sales were also driven by groceries and health and wellness.
Sales at Walmart Connect, the retailer’s advertising business, rose 26%. Additionally, the division’s e-commerce net sales increased by 24% due to strong pick-up and delivery operations.
“Walmart once again touted diversification into solutions and services beyond high-margin products as a key focus,” Spiekerman said. “26% growth in the company’s advertising arm, Walmart Connect, and continued growth in marketplace seller onboarding are evidence of that momentum.” “In short, Walmart is no longer just a place to sell products. That’s it,” Spickerman said. “Confidence in Walmart’s long-term prospects stems from the business model transformation and investments the company is currently making.” “As Walmart looks at its business in a new light, seasonal performance Naturally, we’ll be less concerned about short-term category failures,” Spiekermann said.
Walmart International’s net sales increased 10.8% to $28 billion. At constant currency, the segment’s net sales increased 5.4% to $26.7 billion. Investopedia defines a fixed currency as an exchange rate that is used to eliminate the effect of fluctuations when calculating financial statement performance numbers.
The segment’s e-commerce sales fell 3%. Both overall and e-commerce sales growth took a hit due to the timing of his Flipkart’s Big Billion Days event, which was changed from the third quarter of last year to the fourth quarter of this year.
Walmart de Mexico and CentroAmerica led overseas sales. The company, known as Walmex, reported a 9.4% increase in net sales on a constant currency basis to $10.6 billion.
Walmex comp sales increased 8%, driven by the popular Bodega format and sales at Sam’s Club.
Walmex’s e-commerce sales increased by 16%.
Canada ranked second in international sales growth, with net sales increasing 5.3% at constant currencies to $5.8 billion. Net sales in China increased 25.3% to $4.5 billion on a constant currency basis.
At Sam’s Club, Walmart’s warehouse club division, same-store net sales including fuel increased 2.8% and same-store net sales excluding fuel increased 3.2%.
Thanks to home delivery and curbside pickup, Sam’s Club’s e-commerce net sales increased 16%. Membership revenue increased by 7.2% as membership numbers hit an all-time high.
Walmart Chief Financial Officer John David Rainey said shareholders repurchased 700,000 shares at an average price of $159.77 per share, for a total of $111 million.
Replays and transcripts of Thursday’s presentation and investor call can be found on Walmart’s corporate website by logging into https://corporate.walmart.com/news/events/fy2024-q3-earnings-release and clicking “Replay.” You can view it by selecting “View”.