Wal-Mart Slides, Free Cash Flow Fails To Cover Dividends And Buybacks

Tyler Durden's picture

Despite reporting strong earnings which beat on both the top and bottom line in today's most anticipated earnings report, Walmart stock is down 3%, sliding to the lowest level since late July after it provided full year EPS guidance whose midpoint was below Wall Street expectations.

First, here are WMT's otherwise respectable historical results.

  • Q2 adj. EPS $1.08, beating est. $1.07, on the top end of the $1.00- $1.08 range
  • Q2 revenue $123.4BN, beating est. $123.05b
  • Total U.S. comps. ex-fuel up 1.7%, in line with consensus est. of 1.7%
  • Wal-Mart U.S. comps. up 1.8%, est. up 1.8%; forecast up 1.5%-2.0% in Feb.
  • Wal-Mart U.S. traffic up 1.3% y/y, avg ticket up 0.5%
  • Wal-Mart U.S. E- commerce sales up 70 bps y/y, GMV up 67%

Sam's Club results were a little weaker, with comps of 1.2% missing expectations of 1.4% increase, as a result of the average ticket down 0.9% despite a 2.1% increase in traffic.

  • Sam’s Club comps. ex- fuel up 1.2%, est. up 1.4% (Consensus Metrix); co. saw up 1%-1.5%
  • Sam’s Club traffic up 2.1%, avg ticket down 0.9%

Meanwhile, as Bloomberg notes, Costco, Sam’s Club main competitor, reported monthly comp. sales ahead of estimates in each of May, June, and July

And while WMT's historical data was solid across the board, traders were concerned with the company's guidance:

  • Sees 3Q EPS 90c-98c vs est. 98c (range 90c-$1.05)
  • Sees 3Q Wal- Mart U.S. comp. sales ex-fuel up +1.5%-2%
  • Sees 3Q Sam’s Club ex- fuel comps. up 1%-1.5%

But the biggest red flag was the full year adjusted EPS forecast, which at $4.30-$4.40 (vs the previous $4.20-$4.40), the midpoint of which trailed the consensus estimate of $4.39.

Finally, in terms of cash flow, Wal-Mart reported a sharp drop in YTD operating cash flow, which declined by $3.6 billion, and with CapEx largely unchanged, YTD Free Cash Flow of $6.9 billion was $3.4 billion worse than the year ago period. This is troubling because as the table below shows, WMT used up more than 100% of its YTD free cash flow to fund dividends of $3.1 billion and stock buybacks $4.4 billion for the first 6 months of the year. Should the FCF decline acceleate, how long until WMT's sacrosanct dividend (or buyback) is in jeopardy?

As a result, the stock was down as much as 3.0% in the pre-market, sliding to three week lows.

Full earnings presentation here.

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Hammer823's picture

No worries.  Walmart's stock is heavily subsidized by the Government through SNAP, Disability, SS, and a myriad of other income redistribution programs.

Just like the stock market is heavily subsidized by the Fed, Instituions, and the global Central Bank cartels.

 

 

 

Paul Kersey's picture

Aldi's, which opened up right across the street from our newer Walmart super center, undercut the hell out of Walmart's food prices. Consequently, Walmart has had to lower its prices to keep customers. That has to be cutting into its bottom line.

Aldi's is planning on going head-to-head against Walmart all over the country. The dollar stores are also cutting into Walmart's customer base. Walmart, which has used predatory pricing against other grocery stores, may be finding out that "he who lives by the sword, dies by the sword".

CheapBastard's picture

Wlamart and Amazon's food section (Whole Paycheck) will have more stiff competition when another German company opens up:

 

German market chain Lidl maps its first U.S. stores

 

https://www.usatoday.com/story/money/business/2017/05/30/lidls-first-us-...

Paul Kersey's picture

You are absolutely correct. U.S. grocery chains are becoming more and more international. International grocery chains are further proof that the New World Order is no longer new and is growing like a cancer.

Handful of Dust's picture

I never thought Walmart would become so viciously anti-American but at least we now know who all the enmies are as they come out of the closet.

GUS100CORRINA's picture

Wal-Mart Slides, Free Cash Flow Fails To Cover Dividends And Buybacks

My response: Many companies in America are in the same place including many of the companies who were ONCE part of President TRUMP's advisory council.

I am truly disappointed by many of these fine leaders who call themselves CEOs.

They are nothing but WOLVES in SHEEP's clothing pretending to be patriots, but in the end they are obedient to only the wicked one.

ReturnOfDaMac's picture

It has always been thus.  Don't care if AMZN destroys this piece of crap chain, the same way they destroyed the tens of thousands of local businesses that used to provide middle class jobs in local communities.  They squeezed their suppliers and in many cases forced them to offshore. Can't die soon enough.

Offthebeach's picture

As the kids say, you are now "woke."

 

mellowde's picture

I recognized their anti-american stance over 12 years ago when I began to see chinese shipping containers on it's parking lot at Laurinburg NC near where I used to live.  Gutting our economy has been their goal for a long time.

buzzsaw99's picture

a walmart employee told me how cheap cards were at the dollar stores.  i never pay more than $0.50 - $1.00 for a birthday type card and haven't for many years.  walmart is charging like $3-$5.  that alone has saved me a shitload of money.

Thrash's picture

Wait until LIDL hits here. ALDI can charge less because they don't sell brand names. You know the mindset of people today that can't buy generic shit and have to buy brand name shit even though it's the same shit. I still find Walmart to be cheapest in my area and if they aren't on certain things, their Savings Catcher program reimburses me the difference if a competitor is selling it for less.

RedBaron616's picture

Lidl just opened up here about 6 months after ALDI. I think ALDI has the upper hand in terms of prices. Lidl has a bigger store, but that means they need to move more product.

In my area, Walmart can't hold a candle to ALDI. Matter of fact, one ALDI moved directly across from Walmart. ALDI and other German discounters drove Walmart out of Germany. Every time Walmart cut their prices, ALDI and company did the same.

baldknobber's picture

Ah yes the part of the population that bitch and moan about China stealing our jobs and factories, then jump for joy at the thought of German companies taking down Wal-Mart. Praise Aldi's for undercutting Wal-Mart, isn't that what China did? If you don't think Aldi's is as subsidized and cold hearted as Wal-Mart you are fooling yourself

Hammer823's picture

Same here.  But when I shopped at Aldi's out of curiosity there was only one checker for the whole store.

I'll pay a little more for the convenience of not waiting in a long line.

RedBaron616's picture

Yes, but unlike Walmart checkers, ALDI checkers move and get the line moving. Why do you think prices are so cheap? They don't have 5 useless checkers moving like snails like Walmart does.

Pay more. Your choice. If you think Walmart checkout is fast, you must be checking yourself, in which case they fooled you into doing their job!

Buck Johnson's picture

Thats totally the truth.

 

Sid Davis's picture

For food items my wife and I don't go to Walmart anymore unless we just can't find what we want at Aldi's or Trader Joe's.

For anything else we put an effort into finding it anywhere but Walmart. Though I do miss seeing some of the strange characters at Walmart.

http://walmart-people.com/Home

Cathay Kid's picture

So getting illegals off of SNAP will also hurt WM.

RedBaron616's picture

GOP doesn't have the spine to do so.

deimos178's picture

that's true, no politician has a spine to do anything but the cold, hard reality of economics will do what they won't do. Some day soon we will run out of other people's money and then the party stops.

mellowde's picture

naw...they'll just print more money...we now live in a debt based economy...only you and me not accepting their money for goods and services will end the party...if it was going to end, it would have done so a long time ago....they have a captive audience (you and me)...

Harry Lightning's picture

You think guidance is bad now, wait till you see how bad earnings are now that the CEO made his disgusting lie-filled screed against the President.

I will shop at any possible place other than WalMart just to punish the company for their support of perversity through diversity, and discriminating against White people to do it.

Cathay Kid's picture

Agree. If you are lucky to have an Aldi's near, they are so cheap the arabs stock their convenience stores there.

Watch out, WM bought Jet.

mellowde's picture

...and put the jet exexutives in charge of walmart's web site...which is why their web site is so pitiful with descriptions lacking vital information such as size and weight, etc...no walmart is still headed downhill...the bigger they are the harder they fall...I stopped shopping in their stores 8 years ago due to the rat-like-maze layout which pits customers against each other...narrow aisles with displays blocking pathway, etc....and poor quality and no savings....I just stopped punishing myself....the regular grocer down the street has better quality and I average about the same per week spent and am much more happy....

meterman's picture

Harry - You are so correct - Walmart is destroying itself - high prices, low inventory, cheap junky products. Amazon is eating their lunch. Screw them and their idiot CEO.

buzzsaw99's picture

do you really give a shit if walmart discriminates against white people?  their own employees hate their guts.

RedBaron616's picture

Every company in America has signed on to the diversity/white discrimination, so only buy from super small businesses. Any corporate entity has bowed to political correctness.

small axe's picture

Maybe the company will slide off the face of the planet and take its cheap junk and cheap jobs with it.

Paul Kersey's picture

"and take its cheap junk and cheap jobs with it."

Walmart is America's largest private employer by a wide margin.

https://en.wikipedia.org/wiki/List_of_largest_employers_in_the_United_St...

If those cheap jobs go, then debt-serfs on taxpayer paid for welfare will grow. Working for low Walmart wages is bad, but not working at all is worse. Be careful what you wish for.

PT's picture

We really need to learn how to acquire land and resources while entirely bypassing the debt-money system.  Learn or die.  Weerf huckt.

Xena fobe's picture

Walmart employees qualify for hand outs even while working. 

Paul Kersey's picture

Same goes for a single parent North Carolina first year teacher.

mellowde's picture

...many full time employees qualify for welfare, food stamps, etc especially if they have a family...it's a fact of life that is well-hidden...my question is:  is being employed and not being able to pay your bills really being employed?...

PT's picture

Welcome to the Club.  Many years ago I decided that if a job does not pay enough money to get you back to work the next day then it is not a job.  It is a hobby.  Perhaps a very unpleasant hobby, but a hobby none-the-less.

Think of rich people who have "hobby farms".  It would not surprise me in the least if some of those farms do not run at a profit, hence the pre-fix "hobby" to "farm".  At least the rich guy enjoys his farm.  But I would be equally unsurprised if some of those farms DO make a profit - the guy running it, by definition, knows a thing or two about creating profitability and that could easily be a major consideration for his operations.  Hence some hobby farms would be more profitable than most jobs ... or at that point, the rich guy drops the "hobby" pre-fix and just calls it a farm... which is a long-winded way of re-iterating:  If you have a "job" and yet still need to rely on hand-outs to survive then you do not have a job.  You have a (most probably unpleasant) "hobby".

PT's picture

... becoz everyone has already bought everything they will ever want and now they don't need to buy anything else so everyone will now sit down and has a well-earnt rest!

Duz I get a prize?

I am Jobe's picture

I guess Christmas is gonna be bleak but then again Murikans will line up to buy crap all the time. Shame on Murikans not knowing how royally fucked they are . 

CheapBastard's picture

I'm waiting for Walmart to start stocking those new action figures of Al Sharpton wearing a Santa outfit while driving his purple Escalade.

 

They should fly off the shelf...or at least be stolen pretty fast by hood rats.

mellowde's picture

...not likely they be stolen with store greeters, electronic scanners at exits, overhead cameras even in bathrooms, etc...I've seen 'em throwing people onto the ground and pat search bodies when they suspected shop-lifting....they are nazi security people...

viator's picture

Maybe it would be smart for the CEO of Walmart to attack Donald Trump right now.

meterman's picture

Last year TARGET management come out for that criminal Hillary and the Socialist Democrat party. Their sales plummeted. Watch for the same result at Walmart. 

Handful of Dust's picture

Target has never recovered after their alt left suppport for the crook and Obama's tranny bathroom policies.

 

 

And then there was their cover up of the credit card breach where they allegedly knew of the hack but hid it from customers:

 

Target Settles 2013 Hacked Customer Data Breach For $18.5 Million

 

http://www.nbcnews.com/business/business-news/target-settles-2013-hacked...

Haitian Snackout's picture

Never could understand the appeal of Target. The few I've been in were such nothingburger stores. Not even cheap either.

pliny the longer's picture

any day seeing the wal mart greeter guy is a good day.  

agreed with consensus here, F wal mex.  absolutely disgusting place, hood rat central.  still can't get past the 74 checkout lanes with 2 open by a stoned out obese tatted up loser.  just WTF 

just the tip's picture

the last time i was in sam's, i noticed a checkout person / girl similar, but different from your description.

mid-20s.  black hair, not dyed. beautiful face/complexion.  immaculate make-up, not too much, but you could tell it took time.  great rack.  tight black tee shirt.  tee shirt read, "ride or die".  did i mention, she had a great rack?  both arms tatted completely to the wrist.

my point is, i was thinking of being a wal-mart HR person interviewing her for employment.  and staring.  the conversation would go something like:

HER:  do you have a problem with tattoos?

ME:  no.

HER:  then why are you staring?

ME:  i'm staring at your tits.

after going after the tattoo issue first, for staring, her lawsuit would look like she was grabbing straws for the tits comment. 

she did have a great rack.

ludwigvmises's picture

Remember all those idiots who bought supposedly safe dividend stocks because they yield more than treasury bonds? Guess what, US government bond yields are NOT cut. Dividends get cut all the time.

Murderface's picture

Good.  Fuck them.   I'll never shop there again after those comments.

Anyway, the characters that go to Walmart make it a place I don't wish to visit.  80% of the people shopping there are either illegal aliens or criminals. 

Offthebeach's picture

Wal-Mart will just have to further squeeze the 90% of Chinese suppliers, and the 10% Hecho En Mexico guys.

overmedicatedundersexed's picture

what part about NWO off shoring of jobs..did we miss..??  Trump stands against them, they will claw him and bite him like the soul less animals they are

silverer's picture

As Walmart goes, so goes the US. Oh wait. That was GM. OK: As GM goes, so goes the US. Didn't get any better, did it?

Rebelrebel7's picture

Watch "Green Day-Wake Me Up When September Ends lyrics" on YouTube

https://youtu.be/jVO8sUrs-Pw