Walmart's stock surges to record after a grand-slam earnings report

By Tomi Kilgore

Sales growth was not inflation driven, CEO Doug McMillon said, as prices were up just 0.4% from last year

This replaces an earlier item that incorrectly implied some of the timing of management comments.

Shares of Walmart Inc. rallied into record territory Thursday, after the discount retail giant hit a grand slam with its fiscal first-quarter earnings report, boosted by a big jump in e-commerce sales.

The company beat Wall Street expectations on profit, revenue and same-store sales, and raised its full-year earnings outlook.

And the growth in sales reflected increases in transactions, more foot traffic in stores and market-share gains.

"These are not inflation-driven results," said Chief Executive Doug McMillon on the post-earning all with analysts, according to an AlphaSense trancript.

Overall, prices were up about 0.4 percentage points from a year ago, or half the rate of the increase seen last year.

Read more about the government's inflation report for April.

In fact, McMillon said that general merchandise saw "deflation" in the mid-single digit percentage range, while food and consumables prices were up in the low-single digit range.

The lower prices for general merchandise comes as "many consumer pocketbooks are still stretched," leading to more spending on non-discretionary items - what they need rather than what they want - and less on general merchandise, Chief Financial Officer John Rainey said.

The stock (WMT) shot up 7% to $64.01 on Thursday, enough to pace the S&P 500 index's SPX gainers and closing well above the March 21 record close of $61.45. It was the stock's biggest one-day gain since it climbed 6.5% on Nov. 15, 2022.

Net income for the quarter to April 30 rose to $5.1 billion, or 63 cents a share, from $1.67 billion, or 21 cents a share, in the same period a year ago. Excluding nonrecurring items, adjusted earnings per share of 60 cents beat the FactSet consensus of 53 cents.

Revenue grew 6% to $161.51 billion, above the FactSet consensus of $159.57 billion.

Walmart's U.S. sales rose 4.6% to $108.7 billion to beat the FactSet consensus of $107.94 billion, as transactions increased by 3.8% while the average ticket was flat.

"We're seeing higher engagement across income cohorts with upper-income households continuing to account for the majority of the share gains," said Chief Financial Officer John Rainey, according to an AlphaSense transcript of the post-earnings call.

What's also been helping boost sales in the U.S. has been the recent announcement of a new private brand in food called Bettergoods, which Rainey said was the largest food private brand release in 20 years. He said 70% of Bettergoods items are priced under $5.

Sam's Club sales increased 4.6% to $21.4 billion to top expectations of $21.27 billion, as a 5.4% rise in transactions offset a 1% decline in average ticket.

International sales jumped 12.1% to $29.8 billion, exceeding forecasts of $28.80 billion.

Global e-commerce sales rose 21%, led by 22% growth for Walmart U.S., fueled by store-fulfilled pickup and delivery.

Cost of sales rose less than revenue, at 5.1% to $131.83 billion, and consolidated gross margin improved by 0.42 percentage points.

Same-store sales, or sales of stores open for at least the past year, increased 3.8% for Walmart U.S. to beat the FactSet consensus of a 3.5% rise, and rose 4.4% for Sam's Club vs. expectations of a 3.5% increase.

When asked on the call about how much of Walmart's sales are from higher-income consumers, CFO Rainey said as a general rule, Walmart categorizes its customers into three income group: $50,000 a year and below, $50,000 to $100,000 and $100,000 and above.

"[O]ur customer base breaks down to about one-third in each group," Rainey said, according to an AlphaSense transcript, which he believes indicates that Walmart is "not just a play for value anymore."

Looking ahead, the company expects second-quarter adjusted EPS of 62 cents to 65 cents, compared with the FactSet consensus of 64 cents.

For fiscal 2025, Walmart said it expects full-year EPS to be at the "high-end or slightly above original guidance" of $2.23 to $2.37, compared with the current FactSet EPS consensus of $2.37. The company also expects net sales to be at the high end or above its previous growth guidance of 3% to 4%.

Separately, CEO McMillon commented on the recent decision to eliminate some home-office roles, and reduce the amount of remote work.

"Being in person is important. Our culture is stronger when we're together," McMillon said. "We make decisions faster, we're more creative and we help develop the next generation of talent."

The stock has rallied 20.5% year to date, while the Consumer Staples Select Sector SPDR ETF (XLP) has gained 8.8% and the Dow Jones Industrial Average has tacked on 6.2%.

-Tomi Kilgore

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05-16-24 2157ET

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