CNBC’s Courtney Reagan breaks down Walmart’s earnings report. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi
Walmart on Tuesday reported second-quarter earnings that exceeded Wall Street expectations as the retail giant gained ground in groceries and had a strong start to the back-to-school season.
Shares were roughly flat midday Tuesday.
The discounter also sharpened its forecast for the year, saying it now anticipates that earnings per share will range from $6.20 to $6.35. It said it expects Walmart U.S. same-store sales to increase by 5% to 6%, excluding fuel.
Chief Financial Officer Brett Biggs said in an interview with CNBC that customers flocked to stores for items like luggage, party supplies and apparel as they were “coming out of hibernation.” Plus, he said, families have been buying backpacks and items for the classroom.
Biggs said the company is watching the delta variant closely as Covid cases rise, but it has not seen a change in customers’ shopping patterns.
“Mask wearing is back up again, but runs on supplies — things we saw in last March, April [of 2020] — we really haven’t seen again,” he said.
CEO Doug McMillon said in a news release that the company grabbed more market share in grocery, one of its core businesses. He said it has also made progress in new areas, adding thousands of online sellers to its third-party marketplace and nearly doubling advertising sales in Walmart U.S. in the quarter versus a year ago.
Here’s what the company reported for the fiscal second quarter ended July 31, according to Refinitiv consensus estimates:
Earnings per share: $1.78 adjusted vs. $1.57 expected
Revenue: $141.05 billion vs. $137.17 billion expected
Walmart is lapping a year-ago quarter when stimulus checks lifted sales despite limited store hours and customers’ concerns about Covid-19. Last year, Walmart faced new competition as some customers chose to buy groceries at smaller or more convenient supermarkets during the pandemic. Walmart also saw a shift toward e-commerce, as other shoppers looked to avoid going inside stores.
Over the past two quarters, the discounter said some of those major trends have reversed. Walmart is gaining market share in grocery again, according to Nielsen data, as consumers return to old habits. Its food sales grew $2.4 billion versus a year ago, as Walmart attracted shoppers with lower prices and better managed to keep produce, meats and more in stock, Biggs said on an earnings call.
Customers have also swung back to shopping more at stores. Walmart U.S. transactions rose by 6.1% but the average ticket fell nearly 1%. Same-store sales gained momentum each month during the quarter, Biggs said.
Growth of sales at stores and online have slowed, however, when compared with a frenzied period of buying food and items for the home during the earlier part of the health crisis. Walmart’s same-store sales in the U.S. grew by 5.2%, higher than the increase of 3.3% expected by analysts, according to a StreetAccount survey, but lower than the 9.3% it saw in the same quarter a year ago. Over the past two years, the retailer said its same-store sales have increased by 14.5%.
E-commerce sales gains in the U.S. have dropped off significantly, too, growing 6% in the second quarter versus 97% in the year-ago period. They had risen by 37% in the first quarter and 69% in the fourth quarter. Looking over the past two years, however, the retailer said e-commerce sales have doubled.
Walmart said it expects its global e-commerce sales to reach $75 billion for the year.
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