Walmart
Walmart, the world’s largest company by revenue, reported robust comparable same-store sales growth of 9.2% in the USA. This is in spite of the challenging supply chains. However, the retail megalith anticipated this by stockpiling ahead of the holiday season.
Total group revenues were up 4.3% to $140.5 bn from the $134.7 bn for the same quarter in 2020. Cost of sales, however, increased by 4.7%. Net income was down 38% year-over-year. This was primarily due to an increase in working capital, higher interest payments, and the building-up of stocks (up 11.50%) ahead of the festive season, which includes the Thanksgiving holidays on the 25th November.
Walmart cut non-performing operations in the UK, Japan, and Argentina, which seems to be the right strategy. It will focus on growth jurisdictions such as Mexico (where sales were up 7.2%), China (up 16.5%) and Canada (up 6%).
Strong growth in e-commerce sales is finally starting to show a turnaround, after large capital injections and investment in an experienced IT team. This has resulted in sales rising 19.8% and 32% Internationally and in the US, respectively.
Walmart raised its guidance for the full year, and is estimating US comparable sales growth of 6% and adjusted EPS of $6.40. This is better than previous forecasts of between $6.20 and $6.35.
The groups’ dominant scale, and innovation starts-ups such as on-demand autonomous drone delivery (in its infancy) should enable Walmart to mitigate rising cost pressures relative to its smaller peers, and grow market share.
Walmart shares traded lower after the release of these results, despite a strong quarter of comparable sales and an EPS beats. The share price has been static over the past year, trading in a range of $126 to $153. The retail counter is now trading at $147 and could be on the cusp of a break to the upside. Bank of America is projecting a 12-month price target of $190 per share. I am an investor in Walmart, in managed portfolios, and patiently await a turnaround.
