Walmart stock is soaring 8% in the premarket, pushing Dow futures even higher – WMT has a 2.4% weighting in the DJIA – after reporting earnings that smashed expectations and boosted guidance.
The company reported Q2 EPS of $1.29, above the highest Wall Street estimate (consensus 1.22, range 1.17-1.28), on revenue of $128BN, also above the highest forecast (consensus $126BN, range $124.6BN-$127.5BN).
The company reported U.S. comps sales ex-fuel up 4.5%, more than double the estimate of 2.2%, and the strongest Walmart U.S. comp. in more than 10 years, led by grocery, apparel, seasonal. Wal-Mart U.S. traffic was up 2.2% y/y, while the average ticket was up 2.3%. eCommerce contributed approximately 100 basis points to segment comp sales growth with strength in online grocery and eCommerce home delivery.
Sam’s Club comps. ex-fuel rose 5.0%, est. +2.2% driven entirely by an increase in traffic (+6.7%), while the average ticket was down 1.7%. 2Q net sales at Walmart Intl rose 4.0% to $29.5BN.
And while revenue and EPS were impressive, Q2 operating income declined 3.7% as cost of sales, and SG&A costs rose, most likely reflecting an increase in labor costs. At the same time, membership and income was $969 million, a 31.1% drop from the prior quarter. Gross margin rate declined 34 basis points due primarily to price investments, increased transportation expense from higher fuel costs and third-party transportation rate pressures, “and the mix effects from our growing eCommerce business.”
The company’s Q2 e-commerce sales rose +40% Y/Y, an improvement to Q1’s +33% Y/Y, and 4Q +23%. The company said it was on track to reach ~40% of the U.S. population by year-end with grocery delivery.
The company also reported $11.1BN in operating cash flow YTD, and $6.8b in FCF.
Finally, Walmart solidly boosted its full year outlook, and now sees adjusted 2019 EPS (ex-Flipkart) at $4.90-$5.05 from the first forecast given in Feb. of $4.75-$5.00. (the forecast excludes sale of majority stake in Walmart Brazil, unrealized losses on JD.com investment, adjustments for tax overhaul. Now sees year effective tax rate 31%-33%, had seen 24%-26%.)
The company also sees year net sales up ~2% in constant currency up from +1.5%-2%. Finally, WMT boosted year Walmart U.S. comp. sales growth view to “around” 3% from “at least” 2%; sees Sam’s Club comp. growth “around” 3% from prior down 1% to flat.
The results understandably have sent WMT stock surging, up some 8% at last check, although keep a close eye on WMT sales in the current quarter, when as a result of reciprocal tariffs, prices for a lot of products sold at the chain are about to go up substantially.