Walmart (NYSE: $WMT) released better-than-expected results on Thursday, August 15, 2024, showcasing its resilience amid headwinds.
Walmart’s Q2 Results
In the second quarter, Walmart reported a 4.8% increase in revenue to $169.34 billion, against forecasts of $168.46 billion. Its EPS came in at $0.67, a 9.8% YoY rise, and above forecasts of $0.65.
The company reported a 21% growth in sales for its global eCommerce business, while the global ad business grew 26%, including a 30% growth in Walmart Connect in the US. Walmart reported that global inventory was down 2%, including 2.6% for Walmart US.
CEO’s Comments
Walmart CEO Doug McMillon commented, “Each part of the business is growing.” McMillon added, “Store and club sales are up, eCommerce is compounding as we layer pickup and even faster growth in delivery as our speed improves.”
Walmart Raises Full-Year Guidance
Following the stellar Q2 results, Walmart raised its full-year guidance. It now expects revenue to grow 3.75% to 4.75% YoY, up from 3% to 4% in the previous guidance. It also raised its EPS guidance to $2.35 to $2.43, compared to $2.23 to $2.37 in the prior guidance.
Key Takeaways From The Earnings Call
During the Thursday earnings call, Walmart executives spent a good portion of the segment discussing the state of US consumers. Here are the main takeaways from that investor call.
Comparable Store Sales Stable
CEO McMillon said the company had not experienced “a weaker consumer overall.” According to CFO John David Rainey, Walmart had seen a “largely consistent” sales pace by month in the second quarter.
The CEO emphasized that they were focused on growing market share across all income levels, which he noted had been crucial to driving sales at the company.
He noted that while low-income consumers were more budget-conscious, higher-income consumers were driving sales growth, as they had more money for discretionary purchases.
Walmart Focused On Lower Prices
According to the earnings call, Walmart’s US location and the membership-based Sam’s Club were both “slightly deflationary” during Q2. Walmart stated that some of its suppliers had cut prices, while others claimed they faced cost pressures. However, McMillion said they were pushing aggressively as they believed “prices need to come down.”
Use OF AI And Automation Drive Efficiency
Executives also gave updates on AI developments. The CEO said Walmart would soon launch an AI shopping assistant. McMillon also noted that using AI to write product descriptions was “100 times more productive” than having people do it.
E-Commerce Segment Nears Profitability
Walmart revealed that e-commerce retail sales had grown. The segment’s losses had also narrowed as they worked to lower costs. According to the CFO, the retailer saw a 40% decline in delivery cost per order in Q2. He added that the e-commerce retail sales had made the biggest contribution to the company’s operating income growth.
According to the CEO, generative AI has played a crucial role in making e-commerce more profitable.
WMT Stock Performance
After the stellar results were released, WMT stock rose 6.58% at the closing bell on Thursday to $73.18. The stock is up 37.82% year to date and 37.84% in the past 12 months.
Analysts forecast a wide range for the stock, with a high of $82 and a low of $64. Their average price target for the stock is $73.76, a 0.79% upside.
Is Walmart A Buy Or Sell?
Amidst the current economic headwinds, which include inflation, Walmart has proven quite resilient. Despite consumers being more budget-conscious, Walmart has found a strategy that allows it to grow sales. The company is also forecasting growth in annual revenue.
Based on its upbeat guidance and its stellar Q2 performance, adding Walmart to your portfolio could potentially yield favorable returns.
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