What Surging Online Sales Mean for Walmart Investors

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Walmart Inc. (NYSE: WMT) reported third-quarter fiscal 2019 results before markets opened Thursday. The retailing giant posted adjusted diluted earnings per share (EPS) of $1.08 on net sales of $124.89 billion, including Sam’s Club membership fees and other income of $997 million. In the same period a year ago, Walmart reported EPS of $1.00 on sales of $123.18 billion. Third-quarter results also compare to consensus estimates for EPS of $1.01 and $125.55 billion in sales.

Adjusted EPS excluded an unrealized loss of $0.48 on the company’s equity investment in JD.com; a charge of $0.03 for foreign currency upon finalizing the sale of a majority stake in Walmart Brazil; and a benefit of $0.01 due to an adjustment in the provisional amount related to Tax Reform. GAAP EPS of $0.58 was flat year over year.

U.S. third-quarter same-store sales rose 3.4% at the company’s supercenter and discount stores, and comparable-store traffic rose 1.2%. Same-store sales in the company’s Sam’s Club stores were up 5.7% excluding fuel and tobacco. Sam’s Club total net sales, including fuel, dipped 2.3% for the quarter. The forecast for U.S. same-store sales growth was 2.87%.

The company raised full-year same-store sales guidance from “about 3%” to “at least 3%” and lifted adjusted EPS guidance from a prior range of $4.65 to $4.80 to a new one of $4.75 to $4.85. GAAP EPS was lowered from a prior $2.65 to $2.80 range to $2.26 to $2.36. Walmart attributed the changes in EPS guidance to “economic conditions, currency rates and the tax and regulatory landscape in our largest markets remain generally consistent. Additionally, due to unpredictability in stock price fluctuations, guidance for EPS1 assumes no further change for the company’s equity investment in JD.com.”

Consolidated operating income rose by 4.7% year over year in the third quarter. U.S. operating income rose by 2.9% for the quarter while the company’s international segment saw a quarterly drop of 3.7% (up 1% in constant currency). Operating income at Sam’s Club stores tumbled by 12.5% in the quarter.

Walmart reported U.S. e-commerce growth of approximately 140 basis points (up 60 basis points year over year). At Sam’s Club, e-commerce sales rose by 32%.

Consensus estimates call for full-year EPS of $4.79 and sales of $515.73 billion. For the fourth fiscal quarter, Walmart is expected to post EPS of $1.34 on sales of $139.81 billion.

Walmart CEO Doug McMillon said:

We have momentum in the business as we execute our plan and benefit from a favorable economic environment in the U.S. We’re accelerating innovation and utilizing technology to shape the future of retail. We’re making shopping at Walmart faster and easier. Our associates are equipped with the tools to serve customers better than ever before, and they’re doing a great job.

Free cash flow for the first nine months of the 2019 fiscal year totaled $10.3 billion, up by $100 million compared with the same period a year ago. Net cash from operations rose from $17.06 billion in the first nine months of fiscal 2018 to $17.31 billion.

The company paid $1.5 billion in dividends in the third quarter and repurchased $2.3 billion in stock, a 4.9% increase in share buybacks compared with the same quarter a year ago.

Walmart’s shares traded at $103.25, up 6%, in premarket trading Thursday morning, in a 52-week range of $81.78 to $109.98. Shares closed at $101.53 on Wednesday. The consensus 12-month price target was $106.19 before the results were announced and the high target is $120.

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