Walmart Earnings, Guidance Blow Away Expectations Amid Shopping Frenzy, As Americans Rush To Beat Even Higher Prices

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by Tyler Durden
Tuesday, Nov 16, 2021 - 09:15 AM

Unlike many of its retail peers, this morning Walmart gave an all clear when it signaled that the retail giant was weathering the global supply-chain snarls and rising inflation successfully, when it not only beat Wall Street’s expectations - despite its margins suffering a hit in the third quarter - but lifted its annual sales outlook and profit forecast again in anticipation of soaring demand during the crucial holiday season.

First, here's what the company reported for the just concluded third quarter:

  • Adjusted EPS $1.45, estimate $1.40 (range $1.33 to $1.51)
  • Revenue $140.53 billion, +4.3% y/y, estimate $135.69 billion (range $130.66 billion to $140.52 billion)

The big revenue beat was driven by a surge in Q3 comparable sales which soared 9.2% at Walmart’s U.S. stores after excluding fuel, well above the 7% average estimate:

  • Walmart-only U.S. stores comparable sales ex-gas +9.2%, estimate +7.03%
  • Sam's Club U.S. comparable sales ex-gas +13.9%, estimate +7.75%
  • Total U.S. comparable sales ex-gas +9.9%, estimate +6.99%

Remarkably unlike previous quarters when the comp store beat was driven by tickets at the expense of traffic, in Q3 customers both bought more items and paid more for the goods. Transactions rose 5.7% and average ticket climbed 3.3%, reflecting inflationary trends that are sweeping the consumer sector. here is the full breakdown:

  • Walmart-only U.S. comparable transactions +5.7%, estimate +7.75%
  • Walmart-only U.S. comparable ticket +3.3%, estimate 0%

And visually:

Additionally, the company's E-Commerce sales continued to grow at an impressive pace, rising +8%, above the average estimate of +1.93%, while Sam's Club e-commerce sales soared 32%.

While many other retailers including have been struggling to bring products into the United States ahead of the peak shopping season due to shipping logjams, shuttered factories in parts of Asia and a scarcity of raw materials in the recent months, Walmart has been chartering its own vessels to move goods, as a result it said that U.S. inventory was up 11.5% ahead of the busy festive season.

“We have the people, the products, and the prices to deliver a great holiday season for our customers and members,” Chief Executive Officer Doug McMillon said in a statement.

“After two quarters of reasonable but somewhat staid growth, Walmart has posted a very healthy uptick in sales,” Neil Saunders, managing director of GlobalData, said in a note. He said the retailer is poised to benefit from inflation, since it’s known for an everyday-low-price strategy: "As prices rise, more Americans turn to Walmart to help them save money."

Looking ahead, comparable sales in Walmart’s U.S. stores will grow more than 6% this year after excluding fuel, the company said, up from its prior forecast of as low as 5%. Walmart also raised its earnings guidance beat the average analyst estimate; it now expects adjusted profit is expected to be around $6.40 per share up from a previous range of $6.20 to $6.35.

  • Sees adjusted EPS $6.40, saw $6.20 to $6.35, estimate $6.39 (range $6.02 to $6.77) (Bloomberg Consensus)
  • Sees Walmart-only U.S. stores comparable sales ex-gas above +6%, estimate +5.86%

The bold forecast from Walmart come in contrast to rival ecommerce giant Amazon, which issued an underwhelming fourth-quarter outlook and warned of higher costs during the holiday period to weigh on a surge in demand for online shopping.

"Our omnichannel focus is pushing digital penetration to record levels," President and CEO Doug McMillon said.

To be sure, there were some blemishes: the company said its consolidated gross profit rate decreased 42 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

The shares initially popped sharply higher in premarket trading following the stronger than expected newst (Walmart has risen just 1.9% this year through Monday, the worst in an S&P index of food and staples retailers, which has gained 18%. Target Corp., which reports results Wednesday, surged 50% during the same period). However, the stock has since drifted and has dropped to pre-market lows.