Walmart earnings beat estimates, shares rise on higher outlook ahead of holidays

A strong grocery business helped Walmart‘s online sales grow 41% in the third quarter, the company said on Thursday, fueling an earnings beat.

Total sales in the latest period fell short of analysts’ expectations. But Walmart raised its annual earnings outlook ahead of the holiday season.

Its shares jumped more than 3.5% in premarket trading on the news.

CEO Doug McMillon said in prepared remarks Thursday that Walmart is “prepared for a good holiday season.”

Here’s what Walmart reported for its fiscal third quarter compared with what analysts were expecting, based on Refinitiv data:

  • Earnings per share: $1.16, adjusted, vs. $1.09 expected
  • Revenue: $127.99 billion vs. $128.65 billion expected
  • U.S. same-store sales: up 3.2% vs. growth of 3.1% expected

Net income for the period ended Oct. 31 grew to $3.29 billion, or $1.15 a share, compared with $1.71 billion, or 58 cents per share, a year ago. Excluding one-time charges, Walmart earned $1.16 per share, topping expectations for $1.09, based on Refinitiv data.

Total revenue grew 2.5% to $127.99 billion from $124.89 billion a year ago. But that fell slightly short of expectations for $128.65 billion.

Sales online and at Walmart stores operating for at least 12 months in the U.S. were up 3.2%, topping estimates for growth of 3.1%.

The company said e-commerce sales were up 41%, thanks to “strong growth” in online grocery. A year ago, they surged 43%. Last quarter, Walmart’s online sales were up 37%. The company has been calling for U.S. e-commerce sales growth of 35% for the year, which would be slightly less than what it logged in fiscal 2019.

“We continue to see good traffic in our stores,” McMillon said. “We’re growing market share in key food and consumables categories, including fresh.”

Walmart said the average ticket in the U.S. grew 1.9% compared with a 1.8% increase a year ago. Transactions were up 1.3% in the latest quarter, slightly lower than growth of 1.6% this time last year.

Looking to the full year, Walmart now expects adjusted earnings per share for fiscal 2020 to “increase slightly” compared with last year. Previously, it was calling for adjusted earnings per share to range between a slight decrease to a slight increase. Analysts have been calling for 0.3% growth. Excluding Flipkart, Walmart says annual earnings should be up a high single-digit percentage.

The company added it “continues to assess the ongoing civil unrest in Chile and has not included any related potential discrete financial effects in its assumptions.”

All year long, Walmart and Amazon have been neck and neck in a delivery war, trying to offer shoppers as speedy a service as possible.

Amazon announced plans in October to start delivering grocery products for free within a two-hour window to all Prime members living in the 2,000 regions eligible for the service. Until then, Prime members had to pay an additional $14.99 per month to get access to Amazon Fresh, a separate program that offered two-hour grocery delivery.

Walmart has started testing delivering groceries directly to customers’ refrigerators in three cities. Its InHome grocery delivery membership program costs $19.95 a month. And making the most of its bricks-and-mortar stores, it has more than 2,700 grocery pickup locations for online orders across the U.S. Walmart also now offers a “Delivery Unlimited” option from 1,400 locations, where customers can pay $98 annually, or $12.95 monthly, for unlimited grocery delivery.

Walmart shares are up nearly 30% this year. The retailer has a market cap of about $344.2 billion, compared with Amazon’s $867 billion.

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