Walmart in big earnings miss amid higher product, supply chain costs

Walmart reported mixed first-quarter results as increased costs for food, fuel and wage took on a toll on profitability even as sales continued to show momentum.

The retail giant posted net income of $2.054 billion, or $0.74 per share, for the quarter ended April 30, down from $2.730 billion, or $0.97 per share, in the year-ago period. Adjusted earnings per share of $1.30 missed analysts’ estimates of $1.48.

Revenue rose to $141.569 billion from $138.310 billion, topping estimates for $138.803 billion. U.S. comp sales grew 3%, also more than expected. Average ticket for U.S. customers was up 3% from last year.

Sam’s Club comp sales increased 10.2%, and 17.4% on a two-year stack. Membership income increased 10.5%.

E-commerce sales rose 1% and 38% on a two-year basis. Walmart’s global advertising business grew more than 30%.

"Bottom line results were unexpected and reflect the unusual environment," stated CEO Doug McMillon. "U.S. inflation levels, particularly in food and fuel, created more pressure on margin mix and operating costs than we expected. We’re adjusting and will balance the needs of our customers for value with the need to deliver profit growth for our future.”

Walmart's operating expenses as a percentage of net sales also increased by 45 basis points during the quarter, primarily due to increased wage costs in its U.S. stores.

Walmart raised its outlook for sales this year and said it now expects net sales to increase about 4% in constant currency for the full year. It previously anticipated a 3% increase.  But the company lowered profit expectations. Earnings per share for the year are expected to decrease by about 1% compared with the mid- single-digit increase previously expected,

The company released its results the day after it announced a pilot training program for college graduates to store managers within two years.