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.

Walmart