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Strong Q3 Results Prompts Walmart To Raise Earnings Forecast


11/14/2019


Strong Q3 Results Prompts Walmart To Raise Earnings Forecast
The United States based retailing giant Walmart beat market expectations for the third quarter in US comparable sales driven by customers spending more at its stores and purchasing more through its website. This resulted in the retailer gaining market share in food and other groceries segments.
 
Based on the encouraging third quarter performance the largest retailer of the world also raised its forecast for earnings for the entire year of 2019. The optimism saw its shares rise by more than 3 per cent immediately.  
 
With growth reported in the latest completed quarter, Walmart has now reported 21 straight quarters of growth or for  more than five years at a stretch in the US which is unparalled in the US retail industry.
 
According to the Chief Financial Officer of the company, Brett Biggs, there was healthy consumer spending going in to the holiday season. During November and December, a sizeable chunk of their annual revenue is typically earned by retailers.
 
“The consumer remains in pretty good shape, employment situation is good, fuel prices are low … wage growth is pretty good,” he said.
 
The impact of the US tariffs on imports from China was also cushioned well by Walmart. Biggs said. “I think we’ve muted the impact (of tariffs) pretty well up to this point,” he said.
 
Analysts said that the pressure of the Trump tariffs on Chinese imports was managed by the retailer much better than any of its rivals because Walmart generates 56 per cent of its revenue from food and grocery sales.
 
In the quarter ended October 31, there was a 3.2 per cent growth in sales, excluding fuel, at Walmart stores in the US that had been open for at least a year. According to IBES data from Refinitiv, analysts estimated growth of 2.9 per cent.
 
The company’s reported adjusted earnings per share also increased to $1.16 per share which surpassed market expectations of $1.09 per share. There was also a 41 per cent growth in online sales while the growth in the previous quarter was 37 per cent. It was also more than that company’s growth expectations of 35 per cent.
 
However one blotch in the reporting was a 5.4 per cent in operating income at $4.7 billion which continued to remain under pressure which the company said was because of the ongoing investments made by it in its e-commerce business.
 
The online expansion at Walmart has come at the expense of its profitability and according to estimates from Morgan Stanley, the losses at the US e-commerce business of the company could increase to about $1.7 billion for he entire 2019 compared to a loss of $1.4 billion in 2018.
 
Walmart nor expects its earnings per share to increase “slightly” from a year ago after taking into account the impact of the acquisition of the Indian e-commerce retailer Flipkart.
 
Total revenue rose 2.5 percent to $128 billion.
 
(Source:www.bloomberg.com)