WMT earnings impress yet again; Stock presses to ATH
3min read Walmart (WMT) posted strong third-quarter results, beating both EPS and revenue expectations and raising its fiscal-year guidance. Adjusted EPS came in at $0.58, surpassing the consensus estimate of $0.53, while revenue reached $169.6 billion, a 5.5% year-over-year increase and above the anticipated $167.49 billion. These results reflect robust demand across Walmart’s core merchandise categories in the U.S., where the retailer saw continued market share gains, particularly among higher-income households. The company’s ability to exceed revenue and earnings targets has solidified investor confidence, driving premarket gains of around 3.6%.
Key metrics further highlight Walmart’s operational strength, with U.S. comparable sales growth of 5.3%, beating the 3.73% estimate. Sam’s Club also delivered a standout performance, with comp sales (excluding gas) rising 7%, well above the 4.22% expectation. Positive trends in transaction counts and unit volumes contributed to Walmart’s robust performance, alongside eCommerce sales, which increased 27% globally, led by store-fulfilled pickup and delivery and a growing marketplace. Inventory levels were down 1% globally and 0.6% in the U.S., suggesting efficient inventory management without compromising in-stock availability.
Walmart’s gross margin increased by 21 basis points, with improvements largely driven by the U.S. segment, while Sam’s Club gross profit rate saw a substantial 47-basis-point increase. CEO Doug McMillon noted that pricing held steady throughout the quarter, an achievement considering inflationary pressures and Walmart's commitment to affordability. Additionally, the company benefited from reduced eCommerce losses, as well as gains from its growing membership and advertising income, which both posted double-digit growth. Shipping costs and logistics appear well-managed despite some challenges from East Coast port strikes and storms that negatively impacted operating income growth.
Looking ahead to the holiday season, Walmart raised its fiscal-year guidance, now projecting net sales growth of 4.8% to 5.1% and adjusted EPS of $2.42 to $2.47, up from prior estimates. Management’s outlook reflects confidence in a "generally stable consumer" environment, though cautious optimism remains as discretionary spending patterns could evolve. With the holiday shopping season underway, Walmart expects consumers to be resilient but selective, emphasizing value—a trend that may favor Walmart’s value-oriented product mix.
Walmart’s digital business and advertising growth also support its forward outlook. Walmart Connect, the company’s advertising segment, grew 26%, while the global advertising business expanded 28%, with strong traction in the U.S. and international markets. In addition, Walmart’s international operations saw growth driven by Flipkart in India, Walmex, and China. Flipkart’s "Big Billion Days" event boosted eCommerce sales in Q3, although management indicated that this timing shift will likely affect Q4’s growth rates.
For investors, Walmart’s raised guidance amid solid Q3 results provides a bullish outlook for the final stretch of 2024. Analysts are projecting a “good, not great” holiday season, with demand shifting towards discretionary items as consumers recover from recent inflationary pressures. This trend could benefit Walmart’s enhanced assortment of general merchandise, alongside an increasingly competitive grocery selection, which has helped attract a broad income demographic. The retailer’s focus on value and convenience is expected to resonate well with consumers seeking budget-conscious options during the holidays.
In summary, Walmart’s Q3 performance demonstrates resilient consumer spending, efficient cost management, and strategic growth in eCommerce and advertising. With an upbeat outlook, Walmart is well-positioned to capture holiday demand, potentially rewarding shareholders with continued share gains and further expansion of its customer base. Investors will be watching closely for signals on how Walmart’s diverse initiatives may sustain these gains as inflation stabilizes.
Here's a summary of Walmart's FY 2025 guidance updates and how each metric has progressed through the year:
Net Sales (Constant Currency):
- February 2024: Expected increase of 3.0% to 4.0%.
- August 2024: Raised to a 3.75% to 4.75% increase.
- November 2024: Further increased to an expected 4.8% to 5.1% growth, reflecting stronger sales momentum.
Adjusted Operating Income (Constant Currency):
- February 2024: Initial growth forecast was 4.0% to 6.0%.
- August 2024: Guidance was raised to a range of 6.5% to 8.0%.
- November 2024: Increased again to 8.5% to 9.25%, indicating stronger profitability trends.
Interest, Net:
- February 2024: Expected an increase of approximately $100M to $200M.
- August 2024: Revised to an increase of about $100M.
- November 2024: Updated to be approximately flat compared to last year, suggesting favorable interest expense developments.
Effective Tax Rate:
February 2024: Estimated at approximately 25.0% to 26.0%.
August 2024: Adjusted to the lower end of the original guidance.
November 2024: Further refined to approximately 24.5%, reflecting tax efficiency.
Non-Controlling Interest:
- Remained unchanged from the original guidance throughout the year, initially forecasted as relatively flat.
Adjusted EPS:
- February 2024: Expected range of $2.23 to $2.37.
- August 2024: Raised to $2.35 to $2.43.
- November 2024: Further increased to a range of $2.42 to $2.47, showing continued earnings growth.
Capital Expenditures:
Maintained at the original guidance level throughout the year, projected to be approximately 3.0% to 3.5% of net sales.