Walmart Spikes After Solid Second Quarter

Ticker Symbol: WMT

Walmart shares are up 5.5% in the early morning session, after the company released second quarter financials that were ahead of Wall Street’s expectations. The positive results follow from a disastrous first quarter report that resulted in a share pullback that was the sharpest intraday decline in the company’s history since 1987. Walmart is outperforming the S&P 500 for the year after the move this morning, with shares down 3.5%, versus the 10% decline in the benchmark.

The company reported a solid top-line result, posting comparable same store sales of +7% versus an estimated gain of 6.5%. Walmart-only U.S. stores sales growth was 6.5% versus an estimated 5.4% growth. Sam’s Club U.S. comparable sales, excluding gas, were up 9.5%, while the estimate was for a growth of 9%. Aggregate revenue came in at $152.86 billion, up a strong 8.4% year over year, beating the estimated $151.1 billion from analysts.

Earnings also beat expectations. The company reported adjusted earnings of $1.77 per share, down 0.6% from the same period last year, but higher than the consensus estimate of $1.63 per share. Management had vowed to raise prices on products in May when announcing first quarter results, and those price increases were enacted through the second quarter. Furthermore, despite warning that inventories had unexpectedly ballooned in the first half of this year, the company’s resilient earnings number could provide confidence that markdowns remained under control.

The giant retailer also maintained its outlook for the back end of fiscal year 2023. Management had previously cut its profit forecast for the year on July 25^th. The company provided guidance of an adjusted EPS decline of between 8% to 10% for the fiscal year. It sees consolidated sales growth to be around 4.5%. In addition, Chief Executive Officer Doug McMillion indicated that the company was benefiting from a more diverse customer base, with those earning $100 thousand or more per year providing a boost to the company’s sales.

McMillion also said that the back-to-school season in the U.S., which is typically a strong shopping period for families across the country, is off to a good start. Moreover, new Chief Financial Officer, John David Rainey, stated during the earnings call with analysts that Walmart had made significant progress in easing supply chain costs and controlling inventory build.

Lastly, the company also announced a partnership with Paramount+ to boost its Walmart+ offering to compete with Amazon Prime. Walmart+ is the company’s free shipping membership plan that runs for $98 per year. Under the agreement with Paramount, Walmart+ members will receive free access to the Paramount+ Essential plan, which is an ad-supported version of the streaming service. Amazon Prime bundles its free two-day shipping with Prime Video, for a membership that is soon expected to cost $139 per year.

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