Walmart Q3 Profit Drops 40%, But Results Top Estimates

Retail giant Walmart Inc. (WMT) reported Tuesday a profit for the second quarter that declined 40 percent from last year, despite revenue growth, hurt by lower margins amid increased supply chain costs. However, adjusted earnings per share and quarterly revenues topped analysts’ expectations. The retailer also raised its adjusted earnings guidance for the full-year 2022.

“Our momentum continues with strong sales and profit growth globally. Our omnichannel focus is pushing digital penetration to record levels. We gained market share in grocery in the U.S., and more customers and members are returning to our stores and clubs around the world,” said Doug McMillon, President and CEO.

Consolidated net income attributable to Walmart for the quarter was $3.11 billion or $1.11 per share, lower than $5.14 billion or $1.80 per share in the prior-year quarter.

Excluding items, adjusted earnings for the quarter were $1.45 per share, compared to $1.34 per share in the year-ago quarter.

On average, 26 analysts polled by Thomson Reuters expected the company to report earnings of $1.40 per share for the quarter. Analysts’ estimates typically exclude special items.

Total revenue for the quarter, comprising net sales and membership and other income, grew 4.3 percent to $140.53 billion from $134.7 billion in the same quarter last year. Revenues increased 3.3 percent to $139.16 billion in constant currency. Analysts were looking for revenues of $135.60 billion for the quarter.

Total revenue was negatively affected by approximately $9.4 billion related to divestitures at Walmart International. Changes in currency exchange rates positively affected net sales by approximately $1.3 billion.

Net sales grew 4.1 percent to $139.21 billion, and Membership and other income increased 37.9 percent to $1.32 billion from last year. Consolidated U.S. comp sales, without fuel, increased 9.9 percent.

Walmart U.S. comp sales increased 9.2 percent and net sales rose 9.3 percent to $96.61 billion. Walmart U.S. eCommerce sales grew 8 percent.

Sam’s Club comp sales increased 13.9 percent and net sales also grew 19.7 percent to $18.97 billion from last year. e-commerce sales grew 32 percent and membership income increased 11.3 percent.

However, net sales at Walmart International declined 20.1 percent to $23.63 billion, and also decreased 24.6 percent to $22.67 billion in constant currency. eCommerce sales was led by strong growth in China and Mexico as well as Flipkart.

Consolidated gross profit rate decreased 32 basis points, primarily due to increased supply chain costs, a higher mix of lower margin fuel business in the U.S. and a shifting international format mix.

Looking ahead the fourth quarter, the company now expects Walmart U.S. omp sales growth of around 5 percent. Analysts are looking for earnings of $1.48 per share for the quarter.

For fiscal 2022, the company now projects earnings of about $5.00 per share and adjusted earnings of about $6.40 per share on Walmart U.S. comp sales above 6 percent, excluding fuel.

Previously, the company expected projects adjusted earnings, excluding divestitures, in a range of $6.20 to $6.35 per share.

The Street is looking for earnings of $6.33 per share on a revenue growth of 1.0 percent to $564.99 billion for the year.

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