Walmart Earnings (WMT) Fail to Live Up to Investors’ High Hopes

When Walmart Inc. (NYSE: WMT) reported October-quarter earnings on Thursday morning, the company narrowly beat consensus estimates. It was not good enough, apparently. Unlike Wednesday’s reaction to Target Corp.’s (NYSE: TGT) mixed results, Walmart’s earnings are sinking, not raising the stock price.

Here are the numbers

Net income rose to $423 million, compared to a year-ago loss of $1.8 billion for a net margin of just 0.3%. Operating income rose by 130.1%, from $2.7 billion to $6.2 billion.

While the numbers came in better than expected, expectations were even higher. But investors were clearly hoping for a more convincing thrashing.

Walmart’s guidance

Walmart did not issue guidance for the current quarter, but did revise full-year guidance issued in February. Here’s how they stack up:

• Revenue: up from an increase of 2.5% to 3.0% to a new range of up 5.0% to 5.5%
• Operating income: up from $24.6 billion to a new range  of $26.2 to $26.4 billion
• Adjusted EPS: up from $6.29 to a new range of $6.40 to $6.48

The consensus estimate for full-year revenue is $639.8 billion, up 5.6% year over year, and the adjusted Walmart earnings estimate is $6.50 per share, up 6.5% compared to fiscal 2023.

Analysts expect more than Walmart says it will deliver. This is not a good set-up for investors.

Segment details

Sales in the international segment rose 10.8% to $28.0 billion. Operating income rose 29.7% to $1.1 billion. On a constant-currency basis, operating income rose 10.7%. E-commerce sales dropped 3%.

Sam’s Club sales rose 2.8% to $22.0 billion. Excluding fuel, sales rose 3.2%. Same-store sales increased by 3.2% compared to a 10% jump in the year-ago quarter. Transactions rose by 4%, but the average ticket was 0.2% lower. In the third quarter of last year, transactions rose 4.8%, and the average ticket rose 4.9%. Sam’s Club’s operating income was flat at $600 million.

After the Walmart earnings report, the stock traded down about 6% in Thursday’s premarket, at $159.45 in a 52-week range of $136.09 to $169.94. The high was posted on Wednesday.