Q2 2024 Earnings Report for Walmart (WMT)

Walmart







on Thursday increased its full-year forecast, leveraging its reputation for low prices to attract grocery shoppers and drive online sales.

The retail giant surpassed expectations for sales and profits, with a 24% increase in e-commerce sales for Walmart U.S.

Walmart now predicts a 4% to 4.5% increase in full-year consolidated net sales, along with adjusted earnings per share of $6.36 to $6.46. This is an improvement from its previous guidance of a 3.5% sales increase and $6.10 to $6.20 adjusted earnings per share range.

In a CNBC interview, Chief Financial Officer John David Rainey mentioned that Walmart experienced a “modest improvement” in sales of big-ticket and discretionary items such as electronics and home goods. This is a positive shift from the previous year when consumers focused more on essential purchases.

Rainey also noted that consumers are being more selective in their spending. However, seasonal moments like the Fourth of July holiday and back-to-school season have contributed to overall sales growth.

Walmart’s shares closed over 2% lower on Thursday.

Here are the key figures for the second quarter ended July 31, compared to analysts’ expectations:

• Earnings per share: $1.84 (adjusted) vs. $1.71 expected
• Revenue: $161.63 billion vs. $160.27 billion expected

Walmart’s net income for the second quarter increased by 53% to $7.89 billion, or $2.92 per share, compared to $5.15 billion, or $1.88 per share, in the same period last year. Walmart U.S. saw a 2.9% increase in transactions and a 3.4% increase in average ticket size.

Walmart U.S. reported a 6.4% growth in same-store sales, excluding fuel, surpassing analysts’ expectations. Sam’s Club also had a 5.5% increase in same-store sales, in line with expectations.

Walmart saw growth in its online sales in the U.S., driven by its third-party marketplace and increased store pickup and delivery orders.

Chief Financial Officer John David Rainey emphasized that Walmart’s value proposition extends beyond low prices, highlighting the convenience of its services. The company is focusing on these aspects to drive further growth.

Walmart has also diversified its revenue streams by expanding its advertising business and promoting its membership program, Walmart+. These higher margin businesses are expected to contribute to future profit growth, according to CEO Doug McMillon.

Walmart Connect, the company’s advertising business in the U.S., experienced a 36% year-over-year growth in sales.

In recent news, Walmart announced changes to its leadership team, with Judith McKenna retiring as Walmart International CEO and Kath McLay stepping into the role. Chris Nicholas, the current COO of Walmart U.S., will become the new CEO of Sam’s Club.

Unlike other retailers, such as Target, Walmart has been able to maintain strong sales by focusing on everyday staples. Its emphasis on low prices and a wide range of grocery products has shielded it from the impact of changing consumer preferences and economic factors like high inflation.

CFO John David Rainey expressed surprise at consumers’ willingness to spend while still seeking ways to save money. Walmart has observed an increase in sales of its private label food brands, which offer cost savings. Private labels now account for 20% of Walmart’s total U.S. sales, with a 9% year-over-year growth.

Additionally, Walmart has noticed a shift in consumer behavior towards cooking at home, with increased sales of fresh meats, seafood, and eggs, as well as kitchen appliances like blenders and mixers.

While general merchandise sales have seen improvement, they are still slightly down compared to last year.

Walmart’s limited-time sales, known as Rollbacks, have been particularly successful, especially in the food category. CEO John Furner highlighted the positive impact of discounted items like backpacks and chips on sales.

Walmart has experienced a drop in inflation while grappling with ongoing challenges.

Compared to last year, Walmart has seen a 5% decrease in inventory levels and fewer markdowns. While food prices have remained stable, general merchandise prices have decreased. Rainey noted an increase in the purchase of fresh meats, seafood, and eggs due to their affordability.

CEO Doug McMillon mentioned that the back-to-school season has started early and strong, indicating positive sales trends for the upcoming months, including Halloween and the holiday season.

However, Rainey cautioned that Walmart is planning conservatively and closely monitoring general merchandise orders. Consumers now face new pressures such as the resumption of student loan payments, which were temporarily paused due to the pandemic.

Walmart remains cautiously optimistic, considering factors such as moderated inflation, stable employment levels, tightened credit markets, higher energy prices, and additional expenses for customers with student loan payments.

[Correction: Walmart’s net income for the fiscal second quarter increased by 53% compared to the previous year. The prior guidance for adjusted earnings per share range was mischaracterized.]