: Walmart takes the unusual step of raising its outlook in first-quarter earnings report
Walmart Inc. raised its full fiscal year outlook on Tuesday, a move that’s abnormal for the retail giant when it reports its first-quarter earnings.
“Our typical practice is to not update guidance until the second-quarter release, but we’re in an unusual period where Q1 stimulus led to meaningful sales and profit tailwinds that weren’t contemplated when we provided guidance in February,” said Chief Financial Officer Brett Biggs during the earnings call Tuesday morning, according to FactSet.
“The guidance discussed here assumes that COVID conditions continue to improve and there won’t be significant additional government stimulus packages for the remainder of the year.”
Walmart WMT, +2.43% now expects full-year earnings-per-share growth in the high-single digits versus previous guidance for a slight decline. Walmart U.S. comparable sales growth is expected to be in the low-single digits, excluding fuel. Walmart U.S. operating income is now forecast to rise in the high-single digits versus previous guidance for a slight increase.
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“Given continued uncertainty, we’re maintaining our original guidance for the back half of the year, and we’ll update you as we gain clarity on key external variables related to the health crisis and their potential impact on our business and the global economy,” Biggs said.
Walmart is coming off a period in which business soared due to a variety of factors that changed life during the coronavirus pandemic. Walmart said it gained grocery market share at a time when people were cooking at home more. And e-commerce sales were up 37% as shopping shifted online.
“With robust online sales growth of over 37% on a substantial base, coupled with increased margins despite a still-heavily weighted food and consumables sales mix, Walmart’s Q1 performance continues to place it in the extreme upper strata of global retail,” said Moody’s Vice President Charlie O’Shea in a statement.
“All three segments are running on all cylinders, and Walmart’s upward revision to its guidance for Q2 and the balance of 2021 despite continuing global macroeconomic uncertainty is a reflection of its exceptional execution as it can continue to ‘shift on the fly’ as necessary.”
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The three segments are Walmart U.S., Walmart International and the warehouse retailer Sam’s Club. Walmart reported earnings and sales that beat expectations.
One area that some analysts may have wanted to hear more about is Walmart+, the company’s Amazon AMZN, +0.60% Prime rival membership program.
Walmart Chief Executive Doug McMillon said the company continues to make investments to drive member interest.
“[W]e don’t think that Walmart+ should be the primary focus at the moment for us with all these other opportunities. So we’ll keep growing it. At some point, I’m sure we’ll share some more information with you guys about it,” he said on the call.
Some analysts have expressed concerned that membership in the program has slowed.
Samuel Indyk, analyst at Investing.com, is confident that Walmart can compete with Amazon with help from Walmart+.
“Walmart has shown it can adapt to an increasingly competitive online grocery sector with the launch of its Walmart+ service last year. Its e-commerce sales have more than doubled over the last two years, proving that the retailer’s strategy to take on Amazon and others is having the desired effect.”
Others have expressed concern about Walmart’s efforts to tap into new audiences.
“In our view, it is critical that Walmart wins the online battle in food and, as such, it needs to double down on investing in and developing its multichannel proposition,” wrote Neil Saunders, managing director at GlobalData.
“However, at the same time, Walmart must also advance its non-food penetration online, including among younger consumers. The company has shown some prowess in using channels like TikTok to hold live events and in growing its marketplace proposition, but there is much more work to be done on both fronts and it will need to make some bold moves in the next couple of years if it wants to significantly advance its position in an online market that is becoming more crowded and competitive.”
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Walmart is making a point to broaden its horizons beyond groceries, with McMillon talking up first-quarter strength in areas like apparel and home.
“We’ll invest in our general merchandise business and grow in higher margin categories,” he said during the call. “The announced acquisition of Zeekit is a great example. This startup combines fashion and technology through a dynamic virtual fitting room and underscores the desire to grow our apparel business aggressively.”
Walmart announced plans to acquire Zeekit on May 13.
Walmart stock was up 2.4% in Tuesday trading, and has fallen 1.4% for the year to date.
The Dow Jones Industrial Average DJIA, -0.26% is up about 12% for 2021 so far.