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    Walmart Inc (WMT)

    Walmart Inc. is a global omni-channel retailer that offers a wide range of products and services through its three main segments: Walmart U.S., Walmart International, and Sam's Club. The company is involved in mass merchandising, eCommerce, and operates membership-only warehouse clubs, providing products across categories such as grocery, general merchandise, and health and wellness . Walmart emphasizes its omni-channel capabilities, integrating physical stores with eCommerce to enhance customer experience .

    1. Walmart U.S. - Operates as the largest segment, providing mass merchandising and eCommerce services in the U.S., offering products in grocery, general merchandise, and health and wellness categories.
      • Grocery - Includes dry grocery, snacks, dairy, and beverages.
      • General Merchandise - Covers entertainment, hardlines, fashion, and home products.
      • Health and Wellness - Encompasses pharmacy and medical products.
    2. Walmart International - Expands the company's global presence with operations in 18 countries, including eCommerce and omni-channel initiatives.
    3. Sam's Club - Functions as a membership-only warehouse club in the U.S., contributing to revenue through both physical locations and eCommerce.
    Initial Price$68.91August 1, 2024
    Final Price$82.19November 1, 2024
    Price Change$13.28
    % Change+19.27%

    What went well

    • Walmart is growing operating income faster than sales, with profits up approximately 10% on sales growth of about 5%, exceeding their financial targets and demonstrating strong execution.
    • Significant growth in membership income, with Sam's Club reporting a 15.1% increase and Sam's Club China growing over 30%, indicating strong member engagement and contributing to higher margins.
    • Rapid expansion of higher-margin businesses: advertising revenue up 50%, marketplace sales up 42%, and membership income up 22%, reshaping Walmart's profit composition and driving operating income growth.

    What went wrong

    • Margin pressure from GLP-1 drug sales negatively impacting gross profit mix. GLP-1 sales contributed about 1 point to the segment comp but continue to create mix pressures in gross profit.
    • Unanticipated expenses from hurricanes and port strikes negatively affected operating income growth. The quarter included two large hurricanes and a U.S. port strike, which lifted sales growth by a small amount but negatively affected operating income growth by a larger amount.
    • General merchandise expected to underperform health and wellness and grocery, affecting profit margins until normal purchasing cycles return. The company expects general merchandise to improve but continue to underperform health and wellness and grocery until normal purchasing cycles return across general merchandise categories.

    Q&A Summary

    1. Alternative Revenue Streams Contribution
      Q: How much did alternative revenue streams contribute to EBIT growth?
      A: Membership fees and advertising income contributed to a little more than half of our operating income improvement and nearly one-third of overall operating income. These are important growth drivers, but they rely on getting the basics right in core retail.

    2. Operating Income Guidance and E-commerce Profitability
      Q: Did changes in Q4 operating income guide affect outlook for e-commerce profitability?
      A: There's a modest improvement in Q4 performance with the business performing consistently. Shrink has performed better than expected, aiding gross margins. We are confident we'll make money in e-commerce but aren't racing to it; we're focused on long-term growth and meeting customer needs.

    3. E-commerce Growth and Profitability Outlook
      Q: What's the sustainable e-commerce growth and profitability outlook?
      A: We're investing to enhance customer experience and drive growth, with e-commerce now representing 18% of our business, up 300 basis points from last year. We see significant opportunity due to our relatively low e-commerce market share. While confident in e-commerce profitability, we're prioritizing customer service over rushing to profit.

    4. General Merchandise Impact on Gross Margin
      Q: When will general merchandise mix balance, and how will it impact gross margins?
      A: General merchandise has improved, with positive comps due to unit growth despite low to mid-single-digit deflation. We're excited about the season and see bright spots in home, toys, and hardlines. Growth in general merchandise can positively impact gross margin expansion.

    5. Share Gains with Upper-Income Consumers
      Q: How is Walmart gaining share with upper-income consumers?
      A: By offering both value and convenience, we're attracting higher-income customers. Growth in e-commerce, especially marketplace expansion and assortment in fashion and apparel, appeals to them. Categories like gluten-free, grass-fed beef, and organic produce show higher share in pickup and delivery.

    6. Operating Expenses and SG&A Potential Improvement
      Q: Can OpEx get closer to 19% from 21.2%, considering e-commerce losses?
      A: Higher SG&A is driven by investments in marketing and incentive pay for frontline associates. The shift toward digital channels, which have higher SG&A, pressures expenses. While focused on efficiencies, growing digital will continue to impact SG&A.

    7. Acceleration in Average Ticket
      Q: What drove the acceleration in average ticket in the U.S.?
      A: We saw the highest growth in units in food in several years. Positive comps in general merchandise despite deflation, and growth in deliveries under three hours contributed. One-time events like hurricanes also had an impact.

    8. Competition Response to Share Gains
      Q: What are observations on competitors' response to Walmart's share gains?
      A: The competitive landscape is evolving and varies by market. In the U.S., we face fierce competition from various directions. We focus on customers and adapt by learning and applying insights from competitors.

    9. Membership Growth and Impact
      Q: What's driving membership growth, and how does it impact behavior?
      A: Walmart+ membership is up double digits, helping customers save on delivery costs. We're committed to delivering orders on time and complete, enhancing customer experience. Membership enables us to offer additional services and deepen customer relationships.

    NamePositionStart DateShort Bio
    Daniel J. BartlettExecutive Vice President, Corporate AffairsJune 2013Daniel J. Bartlett has been serving as the Executive Vice President, Corporate Affairs at Walmart Inc. since June 2013. Prior to this role, he was the CEO and President of U.S. Operations at Hill & Knowlton, Inc. .
    Rachel BrandExecutive Vice President, Global Governance, Chief Legal Officer, and Corporate SecretaryApril 2018Rachel Brand has been serving in her current roles at Walmart Inc. since April 2018. She was previously the Associate Attorney General in the U.S. Department of Justice .
    David M. ChojnowskiSenior Vice President and ControllerJanuary 2017David M. Chojnowski has been the Senior Vice President and Controller at Walmart Inc. since January 2017. He was previously Vice President and Controller for Walmart U.S. .
    John FurnerExecutive Vice President, President, and Chief Executive Officer, Walmart U.S.November 2019John Furner has been in his current role since November 2019. He was previously the President and CEO of Sam's Club .
    Suresh KumarExecutive Vice President, Global Chief Technology Officer and Chief Development OfficerJuly 2019Suresh Kumar has been serving in his current roles at Walmart since July 2019. He was previously Vice President and General Manager at Google LLC .
    Kathryn McLayExecutive Vice President, President and Chief Executive Officer, Walmart InternationalAugust 2023Kathryn McLay has been in her current role since August 2023. She was previously the President and CEO of Sam's Club .
    C. Douglas McMillonPresident and Chief Executive OfficerFebruary 2014C. Douglas McMillon has been serving as the President and CEO of Walmart Inc. since February 2014. He has held various leadership positions at Walmart over 33 years .
    Donna MorrisExecutive Vice President, Global People, and Chief People OfficerFebruary 2020Donna Morris has been serving in her current roles at Walmart since February 2020. She previously worked at Adobe Inc. as Chief Human Resources Officer and Executive Vice President, Employee Experience .
    Christopher NicholasExecutive Vice President, President and Chief Executive Officer, Sam's ClubSeptember 2023Christopher Nicholas has been in his current role since September 2023. He was previously the Executive Vice President and Chief Operating Officer of Walmart U.S. .
    John David RaineyExecutive Vice President and Chief Financial OfficerJune 2022John David Rainey has been serving as the Executive Vice President and CFO of Walmart Inc. since June 2022. He was previously the CFO and Executive Vice President, Global Customer Operations for PayPal Holdings, Inc. .
    Bob MoritzMember of the Board of Directors, Audit Committee, and Technology and eCommerce CommitteeAugust 15, 2024Bob Moritz was appointed to Walmart's Board of Directors on August 15, 2024. He previously had a long career at PwC, serving as the Global Chair until his retirement in June 2024 .
    1. As you continue to invest in areas like price reductions and wage increases to lay the foundation for future growth, how do you balance these investments with the need to accelerate enterprise-wide profit growth, and are you seeing diminishing returns in these areas that might impact profitability next year and beyond?

    2. With the competitive landscape intensifying, particularly from both traditional and non-traditional retail players, how is Walmart planning to sustain its market share gains in the U.S., and what strategic adjustments are you making in response to competitors' actions?

    3. Given the changes in your fourth-quarter operating income guidance and the significant wage investments at Sam's Club, how are you managing gross margin expectations, especially in light of continued pressure from higher health and wellness sales and potential e-commerce profitability challenges in the U.S.?

    4. With the growth in Walmart Plus memberships, can you elaborate on how this is translating into increased customer spend and loyalty, and how you are leveraging the data from these members to drive growth in your new businesses?

    5. Despite a positive inflection in general merchandise sales, the mix shift towards consumables continues to pressure gross margins; when do you anticipate a more balanced growth between general merchandise and consumables, and what impact will this have on overall gross margin expansion?

    Program DetailsProgram 1
    Approval DateNovember 2022
    End Date/DurationNo expiration date
    Total additional amount$20 billion
    Remaining authorization$13.5 billion (as of 2024-10-31)
    DetailsManage capital structure and return value to shareholders

    Q3 2025 Earnings Call

    • Issued Period: Q3 2025
    • Guided Period: FY 2025
    • Guidance:
      • Full Year Guidance:
        • Sales Growth: 4.8% to 5.1% on a constant currency basis.
        • Operating Income Growth: 8.5% to 9.25% on a constant currency basis.
        • Adjusted EPS: $2.42 to $2.47.
      • Fourth Quarter Guidance:
        • Sales Growth: Implied constant currency growth of 3% to 4%.
        • Operating Income Growth: Implied constant currency growth of 5% to 7.5%.
        • Currency Impact: Expected headwind to Q4 reported sales and operating income growth of approximately 100 basis points and 200 basis points, respectively .

    Q2 2025 Earnings Call

    • Issued Period: Q2 2025
    • Guided Period: Q3 2025 and FY 2025
    • Guidance:
      • Q3 2025 Guidance:
        • Sales Growth: 3.25% to 4.25%.
        • Operating Income Growth: 3% to 4.5%.
        • EPS: $0.51 to $0.52.
      • Full Year FY 2025 Guidance:
        • Sales Growth: 3.75% to 4.75%.
        • Operating Income Growth: 6.5% to 8%.
        • Adjusted EPS: $2.35 to $2.43 .

    Q1 2025 Earnings Call

    • Issued Period: Q1 2025
    • Guided Period: Q2 2025
    • Guidance:
      • Q2 Sales Growth: 3.5% to 4.5%.
      • Q2 Operating Income Growth: 3% to 4.5%.
      • Q2 EPS: $0.62 to $0.65.
      • Inflation Expectations: Inflation expected to remain close to current levels, with general merchandise being more deflationary and consumables and food slightly above flat to up 1% .

    Q4 2024 Earnings Call

    • Issued Period: Q4 2024
    • Guided Period: FY 2025 and Q1 2025
    • Guidance:
      • FY 2025 Guidance:
        • EPS: $6.70 to $7.12 on a pre-split basis and $2.23 to $2.37 on a post-split basis.
        • Sales Growth: 3% to 4% on a constant currency basis.
        • Operating Income Growth: 4% to 6%.
        • Segment Growth: Walmart U.S. and Sam's Club U.S. net sales growth expected to align with enterprise growth; international growth expected to be above enterprise growth.
        • CapEx: 3% to 3.5% of sales for the next couple of years.
        • Leap Year and 53rd Week Impact: FY '25 is a leap year, adding an additional day in Q1, and there will be a 53rd week for comp sales in Q4.
        • Operating Income vs. Sales Growth: Operating income growth expected to exceed sales growth by 150 basis points at the midpoint.
      • Q1 2025 Guidance:
        • Sales Growth: 4% to 5%.
        • Operating Income Growth: 3% to 4.5%.
        • Q1 EPS: $1.48 to $1.56 on a pre-split basis and $0.49 to $0.52 on a post-split basis .

    Competitors mentioned in the company's latest 10K filing.

    • Brick and mortar, eCommerce, and omni-channel retailers operating department, drug, discount, variety, and specialty stores, supermarkets, hypermarkets, and supercenter-type stores, wholesale clubs, home-improvement stores, specialty electronics stores, cash & carry operations, and convenience stores .
    • Companies offering services in digital advertising, fulfillment services, health and wellness, and financial services .
    • Social commerce platforms .
    • National, regional, or international chains or those with a national or international omni-channel or eCommerce presence .
    • Other discount, department, drug, dollar, variety, and specialty stores, warehouse clubs, and supermarkets .
    • eCommerce, health and wellness, financial services, advertising, and data service businesses .
    • Local, regional, national, and global physical, eCommerce, and omni-channel retailers, social commerce platforms, wholesale club operators, and retail intermediaries .
    • Companies offering services in digital advertising, fulfillment and delivery services, health and wellness, and financial services .

    Recent developments and announcements about WMT.

    Financial Reporting

      Earnings Report

      ·
      Nov 19, 2024, 8:07 PM

      Walmart Reports Third Quarter Results for FY25

      Key Highlights:

      • Revenue Growth: Walmart reported a strong revenue growth of 5.5%, with consolidated revenue reaching $169.6 billion. Operating income grew faster at 8.2% to $6.7 billion .
      • eCommerce Performance: Global eCommerce sales increased by 27%, driven by store-fulfilled pickup and delivery, and marketplace growth .
      • Earnings Per Share (EPS): The company reported a GAAP EPS of $0.57 and an adjusted EPS of $0.58 .
      • Guidance Update: Walmart raised its guidance for FY25, expecting net sales to grow between 4.8% to 5.1% and adjusted operating income to grow between 8.5% to 9.25% in constant currency .
      • U.S. Comparable Sales: Walmart U.S. comparable sales increased by 5.3%, with positive growth in general merchandise .
      • Gross Margin: Consolidated gross margin rate increased by 21 basis points, led by Walmart U.S. .
      • Inventory Management: Global inventory decreased by 1.0%, including a 0.6% decrease for Walmart U.S., maintaining healthy in-stock levels .
      • Advertising Business: The global advertising business grew by 28%, including a 26% increase for Walmart Connect in the U.S. .
      • Cash Flow: Operating cash flow increased to $22.9 billion, a rise of $3.9 billion year-to-date, and free cash flow increased to $6.2 billion, up by $1.9 billion year-to-date .
      • Share Repurchases: Walmart repurchased 46.0 million shares year-to-date, amounting to $3.0 billion .

      Significant Trends Affecting Financial Performance:

      • eCommerce Growth: The significant increase in eCommerce sales highlights the shift towards online shopping and Walmart's ability to capitalize on this trend through efficient store-fulfilled pickup and delivery services .
      • Gross Margin Improvement: The improvement in gross margin is attributed to higher gross margins in Walmart U.S. and growth in membership income, along with reduced losses in eCommerce .
      • Inventory Management: Effective inventory management has led to a decrease in global inventory, ensuring healthy in-stock levels and reducing costs associated with excess inventory .
      • Advertising Revenue: The growth in the global advertising business, particularly through Walmart Connect, indicates a successful strategy in leveraging digital advertising to drive revenue .
      • Financial Guidance: The raised guidance for FY25 reflects Walmart's confidence in continued growth and operational efficiency, despite potential economic pressures .

      Conclusion: Walmart's third-quarter results for FY25 demonstrate strong financial performance, driven by robust revenue growth, significant eCommerce expansion, and effective inventory management. The company's raised guidance for FY25 further underscores its positive outlook and strategic initiatives aimed at sustaining growth and enhancing shareholder value.

      Source:

      Earnings Call

      ·
      Nov 19, 2024, 6:40 PM

      Walmart recently released its earnings call transcript, providing several key insights into its financial performance and strategic initiatives. Here are the highlights from the call:

      Financial Performance

      • Revenue and Profit: Walmart reported a 6.1% increase in sales in constant currency and a 9.8% rise in profit for the quarter. E-commerce sales grew by 27%, and advertising revenue increased by 28% .
      • Segment Performance: Walmart International sales grew by 12.4% in constant currency, Sam's Club U.S. comp sales increased by 7%, and Walmart U.S. comp sales rose by 5.3% .
      • Guidance: Walmart raised its full-year guidance, now expecting sales growth of 4.8% to 5.1% and operating income growth of 8.5% to 9.25% .

      Strategic Initiatives

      • Investment in Automation: Over 50% of Walmart's fulfillment center volume is now automated, which has significantly reduced delivery costs .
      • E-commerce and Membership: Walmart Plus membership income grew double digits, and Sam's Club saw a 50% increase in membership income in China .
      • Global Expansion: Walmart continues to expand its international presence, with strong performance in markets like China and Mexico .

      Market Conditions and Analyst Questions

      • Market Conditions: Walmart is experiencing some margin pressure from the growth in GLP-1 drugs but is pleased with the positive sales in general merchandise despite deflation .
      • Analyst Questions: Analysts inquired about Walmart's ability to drive steady growth while reinvesting in areas like price and wages, and the potential for profit acceleration in the future. Management emphasized their balanced approach to investment and profit growth .

      Management's Forward Guidance

      • Profit Growth: Management expects operating income to grow faster than sales over the next several years, with sales growth averaging around 4% annually .
      • Strategic Focus: Walmart is focused on maintaining a balance between profit expansion and investment in the business to ensure long-term financial health .

      Significant Comments and Initiatives

      • Generative AI: Walmart is leveraging generative AI to improve customer experience and operational efficiency. This includes a personal shopping assistant and an AI tool for associates .
      • Community Support: Walmart has been actively involved in disaster relief efforts, providing significant support during recent hurricanes and a port strike .

      Analyst Questions and Management Responses

      • Earnings and Profitability: Analysts asked about the sustainability of Walmart's profit growth and the impact of investments in new business areas. Management reiterated their confidence in the company's financial architecture and long-term growth strategy .
      • E-commerce Growth: Questions were raised about the rapid expansion of Walmart's e-commerce business and its impact on profitability. Management highlighted the importance of balancing short-term profitability with long-term growth opportunities .

      Overall, Walmart's earnings call highlighted strong financial performance, strategic investments in automation and e-commerce, and a balanced approach to growth and profitability. The company remains focused on delivering value to customers while driving long-term financial health.