Walmart reports 3Q19 earnings beat, but revenue miss

Walmart reported 3Q19 results on Thursday (15 November), which revealed that revenue advanced to $124.89bn (+1.4% YoY) vs $123.18bn recorded in 3Q18, while diluted EPS stood at $1.08 (+8% YoY) vs $1.00 posted in the same period of the previous year. Earnings were ahead of consensus analysts’ expectations, while revenue fell short due to currency headwinds. Refinitiv consensus forecasts had expected earnings of $1.01 on revenue of $125.55bn. Net income of $1.71bn, or $0.58/ share, compared with $1.75bn, or $0.58/share, a year ago.

US same store sales climbed for their 16th consecutive quarter, coming in at 3.4% YoY vs an expected 3.1% YoY growth. The performance was buoyed by a 43% YoY jump in online sales as Walmart dramatically increased locations where customers can retrieve online grocery orders, added brands such as Lord & Taylor and ModCloth to its website and significantly expanded its online marketplace. Walmart continued to advance in competing with Amazon in categories including apparel and home goods, while also scaling its grocery business. CFO Brett Biggs noted on the earnings call that the company remains on track to meet its goal of 40% e-commerce sales growth for the full year. A year ago, digital sales climbed 50% YoY as Walmart just started to lap its acquisition of Jet.com.

According to new data from eMarketer Retail, Walmart now accounts for a 4.0% share of total retail e-commerce sales in the US. The eMarketer report notes that Walmart’s e-commerce numbers (including sales at its Sam’s Club and Jet.com websites) are growing at a rapid pace, with growth of 39.4% expected this year. Walmart is expected to take 4% of US e-commerce sales, or c. $20.9bn, according to the market research firm.

Top-5 US companies by e-commerce sales market share 2017 vs 2018:

Source: eMarketer November 2018

Note includes products or services ordered using the internet, regardless of the method of payment or fulfillment; excludes privately held companies and travel and event tickets.

International sales, however, fell 2.6% during the quarter to $28.8bn, partly due to the company selling a majority of its Brazilian business to private equity firm, Advent. Walmart said same-store sales were positive in 9 out of 10 markets where it operates. Walmart recently paid $16bn to acquire a majority stake in Indian e-commerce company Flipkart, in order to get a foothold in that country’s fast-growing economy

Walmart said store traffic was up 1.2% during the quarter, with the average shopper’s ticket rising by 2.2%. Biggs told CNBC that groceries helped fuel those results – Walmart now has a grocery pick-up option at c. 2,100 stores across the US, with grocery delivery at c. 600 locations.

Comparable sales at its Sam’s Club division was up 5.7% YoY, helped by the closing of weaker locations and robust digital growth, while sales at Walmart International advanced 1.6% excluding the impact of currency fluctuations, helped by comparable sales increases in nine of its 10 foreign markets.

Looking ahead, for FY19, Walmart raised its earnings forecast and now expects EPS to be between $4.75 and $4.85. Refinitiv consensus forecasts are expecting EPS of $4.79 for the fiscal full year. Walmart also indicated that it now expects US same-store sales to rise “at least” 3%, compared with a previous outlook of “about” 3%.

Walmart shares ended Thursday c. 2% lower and the share price is down 4.6% YTD.

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