Walmart Posts Mixed Q1 Results, Despite Best Comp In 9yrs

Walmart Posts Mixed Q1 Results, Despite Best Comp In 9yrs
May 17, 2019

 

The retail chain, Walmart Inc. (NYSE: WMT) yesterday reported an 80% y-o-y increase in the fiscal 2019 first-quarter profit, mirroring steep rise in revenues and impressive performance of the company’s subsidiary JD.com. Excluding charges, adjusted earnings per share for 1Q19 beat the Wall Street anticipations, while revenues missed forecasts. Following the results, the stock gained 1.43% or $1.43 to close at $101.31. Walmart shares have gained 18% on y-o-y basis, taking its market cap to approximately $290 billion.

The Bentonville, Arkansas-based company, reported first-quarter 2019 revenues of $123.93 billion, which includes memberships, net sales, and other revenues. In the prior-year period, the company posted revenues of $122.69 billion. Excluding the effect of currency impact, total revenues grew 2.5%. The Wall Street analysts anticipated revenues of $125.98 billion for the quarter.

During the quarter, net sales increased 1.1% to $122.95 billion, while Membership and other revenues fell 7.9% to $976 million. Net sales at Walmart International dropped 4.9% to $28.8 billion.

For the quarter ended March 2019, consolidated net income jumped to $3.84 billion, or $1.33 per share, from $2.13 billion, or $0.72 per share, in the similar quarter last year. The March quarter results include $0.20 per share, which is yet to be realized, net of tax, on the company’s stake in JD.com.

Excluding charges, adjusted earnings for the recent quarter was $1.13 per share, down from $1.14 per share last year. On average, analysts polled by Thomson Reuters anticipated the company to report earnings of $1.02 per share.

Commenting on the results, CEO Doug McMillon said: We’re changing to enable more innovation, speed, and productivity, and we’re seeing it in our results. We’re especially pleased with the combination of comparable sales growth from stores and eCommerce in the US Our team is demonstrating an ability to serve customers today while building new capabilities for the future, and I want to thank them for a strong start to the year.”

The US comp sales of Walmart rose 3.4% in 1Q19, making it the best first-quarter comp in nine years. Analysts had anticipated comp sales of 3.3%. Notably, for the fourth consecutive quarter, the comp sales increased more than 3%. A fall in tobacco sales had a negative impact of 270 points on comp sales. Sam’s Club comp sales rose 0.3%.

CFO Brett Biggs had the following to say about comp sales: “We are pleased with the progress and members are responding favorably, but there’s more work to do.”

Walmart’s US eCommerce sales grew 37%, led by home and fashion divisions. In the similar quarter last year, the company reported online sales of 33%, but below the 43% online sales growth recorded during the holiday quarter.

The company aims to achieve e-commerce sales growth of 35% for fiscal 2019, implying that online sales won’t be as strong as fiscal 2018.

The world’s largest retailer opined that the quarterly earnings had increased the chances of achieving its FY19 goals.

To take the competition head-on, Walmart has recently announced that it has started offering next-day delivery throughout the US on more than 200,000 goods. The company, however, refused to share the money spent on achieving same-day delivery.

Walmart has stated that it will offer a pickup facility on 3,100 online grocery orders and same-day grocery delivery from 1,600 stores by the end of this year.

Regarding same day delivery, CEO Doug McMillon, said: “We’re continuing our transformation to become more of a digital enterprise.”

In a research note to clients, Jefferies analyst says, “Walmart’s early investments in tech/e-commerce and practice of continued price investment, which benefits from the company’s unmatched scale, have positioned it well for future share gains.”

The robust 1Q19 earnings, better-than-expected comp sales, and same-day delivery have turned Walmart bullish.

Technically, the stock is trading above its 50-day moving average. Additionally, the MACD indicator is making new highs. As a result, we can expect the stock to move up in the short-term.

wmt - technical analysis - 17th May 2019

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Sammy

Sammy

Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world


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