Walmart (WMT) Q3 2023 results

walmart said Tuesday that sales rose nearly 9% in the third fiscal quarter as Americans of all income levels bought the company’s low-cost groceries.

The discounter beat Wall Street expectations for the quarter and raised its full-year outlook to reflect that pace.

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Holiday shoppers are in no rush.  What this means for retail stocks

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Holiday shoppers are in no rush. What this means for retail stocks

Shares closed at $147.44 on Tuesday, up more than 6%.

Here’s what Walmart reported for the three months ended October 31, according to Refinitiv:

  • Earnings per share: $1.50 adjusted vs. $1.32 expected
  • Revenue: $152.81 billion vs. $147.75 billion expected

Walmart posted a net loss of $1.8 billion, or 66 cents per share, compared to profit of $3.11 billion, or $1.11 per share, a year earlier.

On an adjusted basis, the company reported earnings of $1.50 per share. The retailer, which also offers pharmacy services, took a charge of nearly $3.33 billion, or $1.05 a share, in the opioid-related lawsuits. He announced a $3.1 billion nationwide settlement on Tuesday to resolve lawsuits and potential lawsuits brought by state, local and tribal governments.

People walk past a Walmart store on August 23, 2020 in North Bergen, New Jersey.

Kena Betancur | SEE press | Corbis News | Getty Images

In a statement, Walmart said it “strongly disputes the allegations in these cases, and this settlement framework does not include any admission of liability.”

In addition to selling groceries, Walmart CEO Doug McMillon said on a call with investors that the retailer also received a boost in the three-month period thanks to a strong back-to-school season in the United States and sales events around the world, including The Big Billion Days, an annual event for Flipkart. Walmart owns the majority of the Indian e-commerce giant.

In the United States, e-commerce sales grew 16% year over year, or 24% year over year.

As online sales increase, Walmart’s advertising business has also grown. Its global ad business grew more than 30% year-over-year, driven by gains in the United States. In the third quarter, Walmart had the highest ad spend all year for sponsored search, a type of ad that suggests products when people browse online.

McMillon said the company is also focused on scaling other newer ventures, including its third-party market.

“Wallets are stretched”

Shoppers are watching how they spend, Walmart chief financial officer John David Rainey said in a call with CNBC. They buy cheaper proteins such as hot dogs, beans and peanut butter instead of more expensive meats. They wait for sales events to buy items like televisions and air fryers and spend less on clothing and home categories.

“Wallets are stretched,” he said. “People have less discretionary income or less disposable income to spend on things – and so they’re looking for value.”

People are also trading in other categories, he said in a call with investors. They buy cheaper versions of baby items and baked goods, including more products from Walmart’s own brands.

As inflation peaks, the big-box retailer has attracted more high-income shoppers. About 75% of its market share gains in food came from households that earn more than $100,000 a year, Rainey said. The discounter saw the same trend in the previous quarter.

Walmart rolled out savings to appeal to budget-conscious consumers, including on the typical Thanksgiving basket. It kept prices at the same level as last year for a group of items that make up the typical holiday meal, such as turkey, gravy and ready-to-heat macaroni and cheese.

“It’s a great example of how we can scale up and absorb some of this to help the families who need it most,” McMillon said on the investor call.

Walmart cut its earnings outlook in July, aggressively cutting back on some commodities as it noticed consumers were buying fewer high-margin discretionary items. At the time, however, it raised its comparable sales forecast due to stronger-than-expected grocery sales.

The discounter also made headway with an industry-wide headache: a glut of excess inventory. Walmart’s inventory rose 13% year over year in the third quarter. That’s down about 26% in the second quarter and 32% in the first quarter.

Rainey said Walmart canceled orders, increased markdowns and cleared the backlog of goods stuck in ports. Now he said most of those goods were in stores. He said about 70% of the increase in inventory is due to inflation rather than more units.

“From a unit perspective, we’re in a much better place than we were in the first part of the year,” he said.

Comparable sales for Walmart in the United States increased 8.2%, excluding fuel. That beat analysts’ expectations of 3.6% growth, according to StreetAccount. The key retail metric, also known as same-store sales, includes sales at Walmart stores and clubs that have been open for at least one year, including renovations, moves and expansions.

Same-store sales at Sam’s Club jumped 10%, excluding fuel, and beat Wall Street expectations of 8.7%, according to StreetAccount. Walmart does not disclose membership numbers for the warehouse club, but the company said its membership revenue increased 8% and its membership reached an all-time high.

One of the bright spots in the quarter was Walmart’s international business. Net sales increased 7.1% to $25.3 billion, an increase of $1.7 billion, although they were negatively impacted by $1.5 billion due to fluctuations in currencies. Its Mexico business, WalMex, led the way with double-digit growth. China also experienced strong growth, with the highest online sales volume in the world.

Getting ready for the holidays

Walmart is navigating a tougher environment as it prepares for the holidays. Inflation is near a four-decade high, driving up prices for housing, gasoline and more. Competitors offer steep discounts to try to eliminate excess inventory. And consumers are again spending on travel, dining and other experiences.

Walmart gave a more conservative outlook for the holiday quarter. He said he expects Walmart’s U.S. comparable sales to grow about 3%, excluding fuel. That’s below Wall Street’s growth expectations of 3.5%, according to StreetAccount.

He expects adjusted earnings per share to decline 3% to 5% in the fourth quarter and consolidated net sales to increase about 3% as they are negatively impacted by about $1.3 billion of fluctuations. currencies.

So far, Rainey said the holidays are having a “pretty strong start” but “consumers are exercising discretion in what they buy.”

On a call with investors, he said the company’s guidance for the coming months “assumes the consumer may slow spending, particularly in general merchandise categories given continued inflationary pressures in food.” and consumables.

McMillon said this holiday season is harder to predict and will be more promotional. He said consumers might turn to Walmart in late December and January because they “are particularly price sensitive.

“It will be one of those years where we closely monitor sales until the last minute of Christmas Eve,” he said. “And then we’ll do a lot of business afterwards.”

Read Walmart’s earnings release here.

By Admin

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