What Has Driven Walmart’s Recent Q1 Results

In this article, we discuss the key takeaways from Walmart’s Q1 and its outlook in fiscal 2020. Our $105 price estimate for Walmart’s stock is slightly ahead of the current market price. We have created an interactive dashboard on What Has Driven Walmart’s Recent Q1 Results, And What To Expect From Fiscal 2020? 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 more of our Trefis Retail company data here.

Key Takeaways From Q1

• On a reported basis, Walmart’s revenue increased 1% year over year (y-o-y) to $124 billion, driven by growth in the domestic market due to its marketplace offerings.
• Walmart’s GAAP EPS grew by more than 80% y-o-y to $1.35, Non-GAAP EPS declined 1% y-o-y to $1.13
• Walmart U.S. delivered a strong top-line performance, with comparable sales of 3.4%. This growth was driven by a 1.1% increase in customer traffic and a 2.3% growth in ticket size in Q1.
• Overall, e-commerce contributed approximately 140 basis points to the segment’s comparable sales growth in the first quarter. Globally, on a constant currency basis, the company’s e-commerce sales increased 37% in the quarter (driven by growth in online grocery and the home/fashion categories). However, it was a deceleration from the +43% pace in Q4.

How has Walmart’s Operating Profit and EPS changed in Q1, and what’s the forecast for Q2 2020?

• The company’s operating income declined 5% y-o-y in the first quarter, primarily due to investments in technology and a rise in employee wages.
• Walmart’s net income grew 83% y-o-y to $3.9 billion in the same period, translating into earnings of $1.35 per share. We expect the company to post $1.14 earnings per share in Q2 2020.

Fiscal 2020 Outlook

• Walmart expects its consolidated net sales to grow at least 3% in constant currency in fiscal 2020, driven by the acquisition of Flipkart.
• It also expects a decline in EPS in low single-digits compared to fiscal 2019. In addition, the company expects comparable sales to range between 2.5% and 3.0%.
• 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 $529 billion in revenues in fiscal 2020, and earnings of almost $14 billion. Of the total expected revenues in fiscal 2020, we estimate $344 billion in the Walmart U.S. business, almost $121 billion for the Walmart International business, and nearly $59 billion for the Sam’s Club business.

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