Walmart Lowers Expectations, Sam's Club Comparable Sales Accelerate

Scott Peters
17 May, 2022
New York City

Walmart Inc reported sales in the first quarter fiscal year 2023 ending in April increased 2.4% to $141.6 billion and net income declined 25% to $2.1 billion. 

Diluted earnings per share declined 23.7% to 74 cents from 97 cents a year ago. 

Sales rose 2.6% on a constant currency basis. 

Walmart U.S. sales increased 4% to $96.9 billion and comparable sales increase declined to 3% after rising at 6% in the previous year's period. 

Walmart U.S. comparable store sales increased 3% from a year ago and rose 9% on a two-year basis and e-commerce sales rose 1% and 38% respectively. 

Average ticket sales declined to 3% from 6% increase in the prior year's quarter but the number of transactions were flat in the quarter compared to 3.2% decline in the prior year's period. 

Also consumers bought fewer items at the time of purchase. 

The retail chain executives in a conference call after the earnings release said customers are prioritizing food over other items as rising inflation dent consumer budgets. 

Rising fuel and food prices created "more pressure on margin mix and operating costs," said CEO Doug McMillion.  

Also inventories surged nearly 33% after the retailer ordered more items to beat the inflation but some supplies arrived late and also cool weather affected sales of landscaping and pool products. 

The tone of executives in the call was less comforting than during the previous quarter's call. 

On the conference call, Walmart noted consumers are more likely to trade down on meat and dairy purchases after the recent surge in prices. 

Grocery sales in the quarter at the U.S. locations rose in low double-digits and general merchandise sales declined in low double-digits. 

Operating income at the U.S. locations plunged 18.2% to $4.5 billion from a year ago.  

Sales at international locations declined 13% to $23.8 billion and fell 11.6% to $24.1 billion. Operating income fell 35.3% or 33.7% in constant currency to $0.8 billion. 

Net sales at stores located in China increased 7.2% on 4.4% comparable sales rise, in Mexico rose 10.4% on 9.2% comparable sales increase, and in Canada jumped 6.9% on 7.7% comparable sales growth. 

Sam's Club, the discount membership warehouse,  sales increased 17.5% to $19.6 billion and comparable sales increased 10.2% from a year ago and jumped 17.4% on a two-year basis. 

Gross margin declined to 2.2% due to higher discounting caused by inventory delays and higher supply chain costs.  

Membership revenues increased 10.5% and number of transactions increased 102%. 

Comparable sales growth picked up to 10.2% from 7.2% in the quarter a year ago. 

The company declared a dividend of $2.40 a share, lower than $2.20 in the previous quarter. 

Long term debt has been on the decline and dropped to $32.1 billion from $34.8 billion at the end of the previous quarter and from $40.3 billion at the end of the quarter a year ago. 

The company paid out $4 billion to shareholders through $1.5 billion in dividends and $2.4 billion of stock repurchase. 

Guidance and Outlook 

The retail chain lifted consolidated sales outlook for the fiscal year 2023 to an increase of 4% in constant currency from the previous estimate of 3%. 

Comparable sales at the U.S. locations are now estimated to increase 3.5% form the previous estimate of 3%. 

Earnings per share are now estimated to decline 1% from the previous estimate of an increase in mid-single digits. 

In the second quarter, sales are expected to rise 5% and comparable sales at U.S. locations excluding fuel are expected to increase between 4% and 5%. 

Earnings per share in the quarter are expected to increase "flat to slightly" from the previous estimate of an increase in low to single-mid digits.  

Company and Stock 

Walmart Inc generated $573 billion in sales in fiscal year 2022, operates 10,500 retail stores and e-commerce platforms in 24 countries, and employs 2.3 million associates worldwide. 

Walmart stock declined 11.4% to $131.20 after the release of earnings and has declined 9.3% in the year so far.