Walmart offset the severe decline and higher wages to generate sales and profits that were higher than feared in the three months to July, allowing it to forecast a full-year earnings decline that was smaller than it capitalized. yes tell investors expected just three weeks ago.
The US retailer reported earnings of $1.88 per share for its fiscal second quarter, up 24% year-over-year and beating consensus estimates of $1.62 per share from retailers. Wall Street analysts, who cut expectations after two profit warnings since May. Adjusted earnings were $1.77 per share.
However, thanks to an 8.4% increase in revenue to $153 billion, the figures show the impact of inflationary pressures on Walmart consumers, many of whom have cut spending on other items. due to rising fuel and grocery prices.
“The actions we have taken to improve inventory levels in the United States, coupled with a greater combination of grocery sales, put pressure on margins for [the second quarter] and our outlook for the year,” Walmart chief executive Doug McMillon noted in reporting that the slump and changed composition of sales in the U.S. had caused the firm’s gross margin to decline. 132 basis points.
However, he added that the company has made “good progress” in cutting costs in its supply chain “and that work is underway.” Operating expenses as a percentage of net sales fell 45 basis points, despite a higher payroll bill for the quarter.
Shares of Walmart have fallen 10% since mid-May, when it suffered its biggest single-day drop since 1987 after warning that soaring fuel and grocery prices were hurting sales. general merchandise at stores in the United States. In July, the company downgraded its full-year profit forecast again, noting that it had to make big price cuts to clear up excess inventory.
Its inventory reached $60 billion at the end of July, up 25% from $47.8 billion a year earlier.
Walmart said it now expects operating income to fall 9 to 11% for the full year, compared with its guidance last month that investors should expect an 11 to 13 decline. %.
It said that excluding divestment and assuming continued inflation but “generally stable” US consumer spending, full-year sales would grow by about 5.5%.
Operating income from Walmart’s US stores fell 6.7% in the second quarter, while the smaller Sam’s Club stores in its inventory reported a 35% drop in profits. However, its international business delivered a 21% increase in operating income.
Investors welcomed the improved outlook, which helped propel Walmart shares 4.2 percent higher in premarket New York trading on Tuesday.