Walmart shines in Q1; raises full-year outlook

Walmart Inc. reported strong first-quarter sales and boosted its full-year outlook as grocery sales and online growth helped offset a slowdown in discretionary spending. 

The nation’s largest retailer, who released its results on day after Target,  said it gained market share in grocery, including among higher-income households. 

"We continue to gain market share in the grocery category, including with higher income and younger shoppers, and we saw good growth in membership income in both businesses,” Walmart president and CEO Doug McMillon told analysts on the company’s conference call.

In the quarter, U.S. sales of general merchandise declined mid single-digits, while sales of food and consumables increased low double-digits, CFO John David Rainey said on the investor call.

Net income totaled $1.67 billion, or $0.62 per share, for the quarter ended April 30, compared with $2.05 billion, or $0.74 per share, from the year-ago period. Adjusted earnings per share were $1.47, beating analysts of $1.32 per share.

Total revenue rose 7.6% to $152.30 billion from $141.57 billion, beating  Street expectations for $148.94 billion. Walmart International sales increased 12.0% to $26.60 billion, more than expected. Sam’s Club sales rose 4.5% to $20.50 billion, slightly below expectations.

Same-store sales for Walmart U.S. increased 7.4%, excluding fuel, with transactions up 2.9% and the average ticket up 4.4%. E-commerce sales jumped 27%, led by pickup and delivery. (By comparison, Target's comparable digital sales declined by 3.4%.) 

Same-store sales at Sam increased 7.0%, with transactions rising 2.9% and the average ticket up 4.0%.  E-commerce sales rose 19%, led by curbside. Membership income grew 6.3%, with the largest quarterly member sign-up on record, the company said. 

Walmart’s performance was also helped by advertising.  Walmart Connect ads grew nearly 40% during the quarter.

Total operating costs rose less than sales, up 7.2% to $146.06 billion, as operating margin improved to 4.1% from 3.8%.

“We had a strong quarter,” McMillon stated in the company’e earnings release. “We leveraged expenses, expanded operating margin and grew profit ahead of sales."

McMillon also reaffirmed the chain's commitment to building its own network of low-cost, fast-charging EV stations.

In comments, David Silverman, senior director, Fitch Ratings, noted that Walmart’s strong first quarter report and earnings beat "are evidence of its improving execution and widening competitive gap around omnichannel initiatives and supply chain efficiency. "

"The company’s share gains despite its already massive scale demonstrate its success in attracting new consumers and deepening its relationship to existing customers," he added.

Despite its positive results, Walmart noted that shoppers remain cautious and are trading down to private label goods.

Looking ahead, Walmart expects second-quarter adjusted earnings per share of $1.63 to $1.68, down from $1.77 a year ago and below analysts consensus of $1.71.

For the full year, however,  Walmart raised its adjusted guidance range to $6.10 to $6.20 per share, up from its previous estimate of $5.90 to $6.05, and in line with Street projections. Consolidated net sales are now expected to rise about 3.5%.

"It's not our ur historic practice to always update guidance exiting Q1, and we don’t necessarily want to establish precedent, but we think in this unique environment, it’s important to provide an ongoing framework as our views evolve,”  CFO Rainey said during the company's earnings webcast.