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Walmart Q2 FY 2023 Earnings Report Preview: What to Look For

Key points to remember

  • Analysts estimate adjusted EPS at $1.64 versus $1.78 in the first quarter of fiscal 2022.
  • Same-store sales in the United States (excluding fuel sales) are expected to increase year-on-year.
  • Revenues are expected to grow by the widest margin in a year and a half.

Profits and Revenues at Walmart Inc. (WMT) grew at a steady pace through much of the COVID-19 pandemic as consumers turned to e-commerce and made more purchases for the home. But these trends are changing as shoppers return to stores and in-person experiences. The changing dynamic could spell trouble for Walmart, as the retail giant has had to lower prices to move products that have piled up in stores. The company also recently announced layoffs and a restructuring of its headquarters operations.

Investors will watch how these factors impact Walmart’s performance when it reports its results for the second quarter of fiscal 2023 on August 16, 2022. Walmart’s Fiscal Year 2022 (AF) ended January 31, 2022. Analysts predict adjusted earnings per share (PES) will decline for a second consecutive quarter as revenue growth accelerates to its fastest pace in a year and a half.

Investors will also look at Walmart’s comparable sales growth in the United States, excluding fuel. This indicator measures the growth rate generated by the company’s existing stores and clubs in the United States, as well as online sales. Same-store sales growth is expected to increase both on an annual and sequential basis.

Walmart shares have moved erratically over the past year. Although the stock was ahead of the broader market in mid-August 2021, it fell through early October and failed to sustain a rally for many months. Walmart shares rallied in March and April 2022, once again outperforming the market. But stocks fell in early May and fell precipitously after the last quarterly report that month. The stock has recovered somewhat since then, but is still struggling to sustain its gains. As of August 14, Walmart shares provided a 1-year total return of -9.9%, trailing the S&P 500 return of -4.1%.

Source: Trading View.

Walmart Earnings History

In fiscal 2020, Walmart’s last fiscal year before the onset of the COVID-19 pandemic, the company’s adjusted EPS fell in three out of four quarters. This performance reversed sharply in fiscal 2021, as quarterly growth accelerated to 23.3% in the second quarter. Fiscal 2022 was even stronger, with a year-over-year improvement in Adjusted EPS of 42.7% in the first quarter of that year. Since that peak, however, adjusted EPS growth has cooled. It fell to 8.0% in the third quarter of fiscal 2021 and fell year-on-year for the first time in more than two years for the first quarter of fiscal 2023. Analysts now expect a second consecutive quarter of decline in Adjusted EPS year-on-year, although at a slower pace than the prior quarter.

Walmart has maintained revenue growth for at least the past 14 quarters. For fiscal years 2018, 2019 and 2020, annual revenue growth ranged from 1.9% to 3.0%. It accelerated sharply in fiscal 2021, with annual growth reaching 6.7% year-on-year. Growth slowed again in fiscal 2022 and has not exceeded 4.3% in the last five quarters. Now, analysts expect Walmart to post 6.8% year-over-year revenue gains, the best performance in a year and a half.

Walmart key stats
Estimate for the second quarter of fiscal year 2023 Q2 2022 Q2 2021
Adjusted earnings per share ($) 1.64 1.78 1.56
Revenue ($B) 150.7 141.0 137.7
Comparable sales growth (YOY%) 6.4 5.5 9.9

Source: visible alpha

The key metric

As mentioned, investors will also be watching another key metric, Walmart’s U.S. comparable sales growth. Comparable sales, also known as same-store sales in the retail industry, measures the sales performance of company stores and clubs that have been opened in the last 12 months. The metric includes sales from Walmart’s renovations, moves, expansions and conversions, as well as e-commerce sales.

Comparable sales growth measures a company’s ability to generate incremental revenue from established stores. If the bulk of a company’s sales are generated by established stores rather than new ones, it’s a good sign that the company’s products have not yet saturated the local market. Note that Walmart does not report international comparable sales growth and US comparable sales figures include Walmart, Sam’s Club and related US e-commerce for both brands. They do not include fuel sales due to gas price volatility.

Walmart’s U.S. same-store sales growth, excluding fuel, ranged from 1.8 to 2.9 percent each quarter in fiscal 2020 before accelerating sharply in fiscal 2021. It reached 10.3% year-on-year in the first quarter of fiscal 2021, but has since fallen. The second quarter of fiscal 2021 fell to 9.9% year-on-year, then to 5.5% year-on-year for the second quarter of fiscal 2022. In the last quarter, growth in comparable sales in the United States was 4.0%, the lowest number since before fiscal 2021. Consensus estimates suggest that comparable sales growth in the United States may accelerate again, but not to the highs of fiscal 2021. Walmart is expected to post U.S. comparable sales growth of 6.4% year-over-year for the second quarter of fiscal 2023.

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