Walmart Could Likely Benefit From Higher Comparable Sales In Fiscal 2019

Walmart‘s (NYSE: WMT) is scheduled to announce its fiscal fourth quarter earnings on Tuesday, February 19. The company’s stock price has fluctuated between $83 and $105 since the beginning of fiscal 2019 (fiscal year ends January 2019), despite strong financial results. This was largely due to a relative slowdown in the company’s e-commerce growth in fiscal 2019 so far (ranging between 33% – 43% on a quarterly basis), which compared to 50%+ levels in the first three quarters of fiscal 2018 ending January 2018. In addition, Walmart’s shareholders also seem to be concerned about the company’s shrinking margins, increased costs, and declining EPS. Going forward, we expect the GAAP earnings pressure to continue, due to investments in technology and a rise in employee wages. In addition, we expect online grocery to drive some growth for the company, though the accompanying expenses could result in further margin pressure. Further, we also expect the company to continue to post an increase in its revenue growth rate, driven by growth across operating segments.

Our $103 price estimate for Walmart’s stock is slightly ahead of the current market price. We have created an interactive dashboard on What To Expect From Walmart’s Fiscal 2019 Earnings, which outlines our forecasts for the company. You can modify our forecasts to see the impact any changes would have on the company’s earnings. In addition, you can see all Trefis Retail company data here.

Fiscal 2019 Outlook

Walmart expects its full-year adjusted EPS to range between $4.75 and $4.85. In addition, the company expects comparable sales of at least 3%, which compares to the previous guidance of at least +2%. The retailer’s management is aggressively rolling out grocery pickup and delivery in the U.S. and expanding omnichannel initiatives in Mexico and China.

We expect Walmart to generate around $513 billion in revenues in fiscal 2019, and earnings of almost $14 billion. Of the total expected revenues in fiscal 2019, we estimate $331 billion in the Walmart U.S. business, almost $119 billion for the Walmart International business, and nearly $58 billion for the Sam’s Club business. Further, we have calculated the retailer’s divisional revenues by estimating the number of stores, square footage per store and revenue per square foot in fiscal 2019. We expect Walmart ‘s fiscal 2019 store count in the U.S. to be over 4800, with average square footage per store of 147k and revenue per square foot of $468, translating into $331 billion (+4% y-o-y) in domestic revenues for fiscal 2019. In addition, we estimate a store count of about 6370 stores in international markets, with an average square footage per store of 58k and revenue per square foot of $319, translating into $119 billion (+1% y-o-y) in international revenues in the same period. On similar lines, we expect Sam’s Club revenues to reach $58 billion (-2% y-o-y) in fiscal 2019, with 599 Sam’s Club stores, 134k square footage per store and $724 of revenue per square foot. We expect a decline here on the account of the closing of 63 Sam’s Club locations.

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