Walmart reported on Tuesday that its quarterly revenue increased by 6% as a result of customers patronising the big-box store over the holiday season and a double-digit increase in the company’s global e-commerce sales.
The retail behemoth also declared on Tuesday that it would buy Vizio, a manufacturer of smart TVs, in order to boost the expansion of its advertising division. Walmart is paying $11.50 per share, or $2.3 billion, to acquire the business.
Chief Financial Officer John David Rainey stated that consumers have continued to exercise discretion while making purchases in a CNBC interview. According to him, people are shopping more frequently yet adding less goods to their carts. Rainey noted that sales of electronics, TVs, laptops, and certain other pricey things have been more difficult.
Nevertheless, he claimed that Walmart’s sales remained strong even after the holiday rush.
Based on an analyst survey conducted by LSEG, formerly known as Refinitiv, here is how Walmart’s results compare to what Wall Street was expecting:
$1.80 adjusted earnings per share compared to $1.65 projected
Revenue: $173.39 billion versus the anticipated $170.71 billion
Walmart’s net income decreased to $5.49 billion, or $2.03 per share, in the three months that ended on January 31 from $6.28 billion, or $2.32 per share, in the same period last year.
From $164.05 billion in the same time last year, revenue grew.
In its fiscal first quarter, Walmart stated that it anticipates a 4% to 5% increase in consolidated net sales. On a pre-stock split basis, it also projects adjusted earnings of $1.48 to $1.56 per share.
The retailer anticipates a 3% to 4% increase in consolidated net sales for its fiscal year 2025. Based on a pre-stock split basis, Walmart projects adjusted earnings per share to range from $6.70 to $7.12.
Following the release of the company’s results, outlook, and acquisition news, Walmart’s stock finished 3% higher on Tuesday. Walmart’s stock has increased by more than 11% so far this year, outpacing the S&P 500’s gain of roughly 4% during the same time frame.
Walmart’s dominance in online retail
Compared to many other shops, Walmart has fared better during periods of high inflation. Families of all income levels have been drawn to it by its value reputation, and it has embraced new revenue streams like selling advertisements, growing its third-party marketplace, and providing a membership service known as Walmart+.
Walmart U.S. had a 4% increase in comparable sales, an industry indicator sometimes referred to as same-store sales. Comparable sales at Sam’s Club rose 1.9%, with fuel included.
Global e-commerce sales exceeded $100 billion in total, rising 23% year over year. E-commerce increased by 17% in the US as customers used curbside pickup and home delivery.
In the United States, customer transactions rose 4.3% when compared to the same period last year. The average ticket, or the amount a consumer spent, did, however, slightly decrease.
In certain categories, prices have decreased. Walmart’s private brands, which are typically less expensive, are becoming more and more well-liked in the United States and other countries.
During a Tuesday earnings call, CEO Doug McMillon stated that several items’ pricing have decreased from a year or even two ago in the general retail category, which includes clothing. Some food items, including apples, eggs, and deli snacks, are more affordable than others, like blackberries and asparagus.
The cost of paper goods, cleaning supplies, and dry food items has increased by mid-single digit percentages from the previous year and by high teens from the previous two.
Walmart likewise retracted its claims of deflation. McMillon warned that the company would soon see a deflationary environment, in which prices not only stabilise but also fall, during the company’s third-quarter earnings call in November. According to him, those reduced costs might enable buyers to purchase additional luxuries.
Rainey, however, stated to CNBC on Tuesday that deflation now appears less likely. “Price stability has improved from three months ago, but there is still a chance of deflation overall,” he stated.
Profit-driven
A contributing factor to Walmart’s profitability growth? The company offers more products than only shampoo, socks, and cereal.
Walmart’s future is largely dependent on this new business strategy, which has seen the company move into more lucrative ventures. The store receives payment, for example, when it ships and packages online orders for vendors who are a part of its third-party marketplace. It operated a delivery service that delivers goods from neighbourhood bakeries and big box retailers like Home Depot.
Additionally, it’s selling more advertisements, with year-over-year improvements for the company of roughly 33% internationally and 22% domestically.
The Vizio acquisition, according to Rainey, will be “an accelerant” for the “high-margin, fast-growing part of our business,” as she stated to CNBC. Walmart was able to present advertisements and obtain greater data about user engagement and potential sales by leveraging the TV’s operating system.
By automating fulfilment centres that handle online purchases and distribution centres that restock store shelves, the corporation has also increased productivity.
Walmart announced during an investor day last year that it intended to generate earnings over the next five years at a greater rate than sales.
As of right now, Rainey informed investors on Tuesday’s earnings call, Walmart anticipates growing sales by more than 5% and operating profitability by more than 8% annually.
Although Walmart’s online store isn’t currently profitable, Rainey claims that the corporation is getting there. According to him, since the business is delivering more goods on each delivery route and selling ancillary services like online advertisements, the cost of fulfilment has decreased by 20% in the last year.
More purchases are being made on Walmart’s website and app, which contributes to the development of those denser delivery routes. He reported a 17% increase in weekly active e-commerce clients over the previous year.
Increasing dividends and opening new stores
Walmart has declared expense reductions in contrast to several other corporations. It declared at the end of January that it would open or grow over 150 stores in the United States in the ensuing five years. This is in addition to a bold plan to modernise the exterior of over 1,400 of Walmart’s current locations.
During the earnings call, Rainey informed investors that stores with that new look have seen increases in sales both inside their own walls and in the neighbourhood. According to him, the remodelled stores have enhanced Walmart’s standing with customers and provided additional space for online orders for pickup and delivery.
Walmart announced that it would increase store managers’ pay to an average of $128,000 annually and provide them with bonuses of up to 200% of their base pay in addition to those store investments.
In late January, as shares were getting close to an all-time high, it also announced a 3-for-1 stock split.
Walmart announced on Tuesday that it will also reward shareholders. This year, it is increasing its dividend by 9%, the highest increase in over ten years.