Will Walmart Continue to Post Big Earnings If Federal Stimulus Spending Ends?

Retail

Published: August 18, 2020 8:28 am

Walmart Inc. (NYSE: WMT) reported second-quarter fiscal year 2021 results before markets opened Tuesday. The retailing giant posted adjusted diluted earnings per share (EPS) of $1.56 on net sales of $137.7 billion, including membership fees in Sam’s Club. In the same period a year ago, Walmart reported EPS of $1.27 on sales of $130.4 billion. Second-quarter results also compare to consensus estimates for EPS of $1.25 and $131.8 billion in sales.

Second-quarter results were “significantly affected” by the COVID-19 pandemic, which the company said “[i]ncreased demand for products across multiple categories [and] led to strong top-line and gross margin results.”

Same-store sales in the company’s U.S. Walmart stores rose by 9.3% and Sam’s Club comparable sales increased by 13.3%. International sales dipped by 6.8% due to government-ordered closures in India, Africa and Central America.

U.S. e-commerce sales nearly doubled (up 97%) at Walmart and rose 39% at Sam’s Club. Memberships at Sam’s Club rose by 60% and membership income reached its highest point in more than five years.

Free cash flow more than doubled year over year, from $6.3 billion to $15.4 billion. Adjusted EPS excluded a gain of $0.89 per share on the company’s equity investment of JD.com, a restructuring charge of $0.10 and a $0.08 charge for a tax item.

The company did not provide guidance, but consensus third-quarter estimates call for EPS of $1.15 and sales of $131.8 billion. For the full year, analysts have projected EPS of $5.01 on revenue of $547.07 billion.

What Walmart did say in a presentation accompanying the earnings release was that second-quarter sales “started strong, both in-store and online, … helped by government stimulus spending.” The company also noted that grocery sales were strong throughout the quarter. Then, this bit: “As stimulus funds tapered off, sales started to normalize, but July comps still grew more than four percent.”

The U.S. economic rebound began in May with a month-over-month gain of a record 18.2% as the first of the federal stimulus checks reached American consumers. Sales slipped a bit in June, posting a gain of 8.4%. In July, sales rose by just 1.2% month over month.

That downward trend in July consumer spending was also noted by Home Depot when it reported second-quarter earnings this morning.

Walmart’s stock traded up less than 0.1% in Tuesday’s premarket, at $135.74 in a 52-week range of $102.00 to $136.13. The high was posted Monday, and the consensus price target on the stock is $139.16.

24/7 Wall St.
5 US Utilities That Might Welcome a Biden Presidency

It’s Your Money, Your Future—Own It (sponsor)

Are you ahead, or behind on retirement? For families with more than $500,000 saved for retirement, finding a financial advisor who puts your interest first can be the difference, and today it’s easier than ever. SmartAsset’s free tool matches you with up to three fiduciary financial advisors who serve your area in minutes. Each advisor has been carefully vetted and must act in your best interests. Start your search now.

If you’ve saved and built a substantial nest egg for you and your family, don’t delay; get started right here and help your retirement dreams become a retirement reality.