Walmart earns $7.8B in quarter

Holidays, sales events drive 55% increase in 2Q profit

Cashiers process purchases at a Walmart Supercenter in North Bergen, N.J., in this Feb. 9, 2023 file photo. (AP/Eduardo Munoz Alvarez)
Cashiers process purchases at a Walmart Supercenter in North Bergen, N.J., in this Feb. 9, 2023 file photo. (AP/Eduardo Munoz Alvarez)


Shoppers shelling out money for holidays and sales events like back to school helped Walmart Inc. blast past analysts' forecasts with second-quarter earnings up 55%, the company said Thursday.

That bodes well for the upcoming Halloween and, of course, Christmas shopping seasons, they said.

Walmart reported a profit of $7.89 billion, or $2.92 per share, for the quarter that ended July 31, compared with profit of $5.15 billion, or $1.88 per share, in the second quarter last year.

Twenty-eight analysts on average had forecast profit of $1.70 per share.

The Bentonville-based retailer said revenue grew 5.7% to $161.6 billion.

Brian Yarbrough, a retail analyst with financial services firm Edward Jones, said Walmart "is doing the right things."

"They continue to see growth in market share, definitely in grocery," Yarbrough said. "Its advertising business is doing well, and the marketplace is growing."

And consumers are spending for holidays this year, Yarbrough said.

"They are under pressure, but when it comes to holidays, they're willing to spend," he said.

"It's the periods in between that are slow," Yarbrough said, "but I think the holidays will be strong."

Carol Spieckerman, a retail consultant and president of Spieckerman Retail, said Walmart's second-quarter performance was "downright remarkable" on several fronts.

"Achieving 24% growth in online sales is quite an achievement given the maturity of the business and shoppers' return to stores," Spieckerman said.

Grocery was also a high point, she said, despite food inflation, though she noted that it's a low-margin category.

Sales in the higher-margin discretionary items, such as electronics and apparel, were still soft, "though not disastrous," Spieckerman said.

Walmart's traffic-driving grocery business "still translates into sales on the nonfood side, even if not to the degree hoped," she said.

But the star attractions, Spieckerman said, were gains in Walmart's global advertising business and the expansion of its online marketplace.

"Both are highly profitable segments that confirm Walmart's shift to solutions and services," Spieckerman said.

"Walmart's greatest strength continues to be its diversification," she said.

Steve Dennis, president and founder of SageBerry Consulting LLC, said Walmart had a very good quarter "especially given that retail is relatively flat."

Walmart has three basic things going on in its favor, Dennis said: its strong reputation for low prices; an uncertain economy in which customers are still seeking bargains; and its high penetration of the grocery market.

And considering what appears to be a backlash against Target Corp. over its Pride month merchandising, Dennis said he assumes that Walmart would have been the primary beneficiary of that.

Doug McMillon, Walmart's president and chief executive officer, said shoppers are looking for value and convenience.

They're shopping across channels, he said -- in stores and Sam's Clubs, and by e-commerce, which is up 24% globally.

"Food is a strength, but we're also encouraged by our results in general merchandise versus our expectations when we started the quarter," McMillon said.

"Our associates helped deliver increases in transaction counts and units sold, and profit is growing faster than sales," McMillon said. "We're in good shape with inventory, and we like our position for the back half of the year."

McMillon acknowledged the pending retirement of Walmart International Chief Executive Officer Judith McKenna, which was announced Wednesday. He thanked her for her 27 years of service to the company and especially her achievements in strengthening the international unit's position within the company.

Spieckerman said McKenna's retirement "clarified the shortlist of CEO successors."

"Kathryn McLay's move to take the international helm in McKenna's wake puts her in the running, though not without risk," Spieckerman said. "Her run as CEO of Sam's Club was impressive and Walmart won't appreciate any backslides."

Walmart shares fell $3.57, or 2.24%, on Thursday, closing at $155.69 on the New York Stock Exchange. The company's shares have traded between $128.07 and $162.78 in the past year.

Walmart's U.S. unit, by far its largest, posted net sales of $110.9 billion in the quarter, up 5.4% from last year's second quarter.

Sales at stores open at least a year, also called same-store sales, dipped slightly to 6.4%. This figure excludes fuel sales. The company continues to gain market share in grocery, with strong unit growth.

Same-store sales are considered a key indicator of a retailer's health.

Inventory dropped 8% with higher in-stock levels.

The unit's e-commerce business rose 24%, driven largely by store pickup and delivery, as well as advertising.

Walmart Connect, its advertising business, grew sales 36%.

Walmart International's net sales rose 11% to $27 billion in constant currency. Sales growth was led by Walmart de Mexico y Centroamerica, also called Walmex; China; and Flipkart in India.

Mexico's bodega format has proven extremely popular, Walmart said, as the company celebrated the 65th anniversary of the Bodega Aurrera stores in that country.

E-commerce sales, helped by strong store fulfilment and advertising, climbed 26%. And advertising sales jumped nearly 40%.

At Sam's Club, Walmart's members-only warehouse division, net sales including fuel dipped 0.3% to $21.8 billion. Same-store sales, excluding fuel, rose only 5.5%, compared with growth of 9.5% in the same period last year.

Curbside pickup led Sam's Club's 18% growth in e-commerce. And active advertisers on the unit's Member Access Platform rose 33%.

Membership income grew 7%, with continued strength in its Plus member growth and renewals.

For the full fiscal year, Walmart Chief Financial Officer John David Rainey said the company expects its U.S. and international units to grow slightly faster than previously expected, and Sam's Club to stay within guidance from the first of the year.

A replay and transcript of Thursday's webcast are available at Walmart's corporate website by logging into http://corporate.walmart.com/newsroom/financial-events and selecting the Second Quarter Earnings Release event.




Upcoming Events