Walmart (WMT) Queued for Q2 Earnings: E-Commerce Strength Likely

Walmart Inc.’s WMT second-quarter fiscal 2022 results, slated to release on Aug 17, are likely to show gains from the company’s e-commerce business. E-commerce strength is likely to have offered respite to sales, which have been affected by divestitures related to the Walmart International business. Walmart recently completed the divestiture of its businesses in Argentina, the U.K. and Japan. Meanwhile, Walmart’s e-commerce business and omnichannel penetration have been growing all the more amid the pandemic-led social distancing.  The company has been taking several e-commerce initiatives, including buyouts, alliances, and improved delivery and payment systems. 

Walmart Continues to Ace Delivery

Walmart has been on wheels to solidify its delivery services, which has become all the more vital amid the pandemic. In this regard, the company’s investment in DroneUp; pilot with HomeValet, introduction Carrier Pickup by FedEx, launch of the Walmart+ membership program; drone delivery pilots in the United States with Flytrex and Zipline; and a pilot with Cruise to test grocery delivery through self-driven all-electric cars are worth noting. The Walmart+ program includes unlimited free delivery, Scan & Go options and fuel discounts. Walmart had also unveiled an alliance with DoorDash DASH in the third quarter of fiscal 2021 to deliver prescriptions from pharmacies of Sam’s Club, alongside expanding Scan & Go to all fuel stations at U.S. Sam’s Clubs.

Prior to this, Walmart unveiled Express Delivery during the first quarter of fiscal 2021 at several stores, which helps it deliver orders to customers in less than two hours. In earlier developments, Walmart joined hands with Point Pickup, Roadie and Postmates, alongside acquiring Parcel to enhance its delivery services. The company’s store and curbside pickup options also add to customers’ convenience. As of the first quarter of fiscal 2022, Walmart U.S. had 3,800 pickup locations and more than 3,200 same-day delivery stores.

Walmart Inc. Price, Consensus and EPS Surprise

Walmart Inc. Price, Consensus and EPS Surprise

Walmart Inc. price-consensus-eps-surprise-chart | Walmart Inc. Quote

E-Commerce to Stay Strong

Walmar’s other e-commerce initiatives include investment in Ninjacart; contracts with Symbotic, Goldman Sachs GS, Shopify SHOP, Green Dot and Microsoft; buyouts of ShoeBuy, Moosejaw and Bonobos, among others. Apart from these, the buyout of a major stake in Flipkart has been aiding the company’s International segment. Together, these upsides have been driving Walmart’s e-commerce sales for a while. In the first quarter of fiscal 2022, U.S. e-commerce sales climbed 37% with strength across all channels. Notably, marketplace and store pickup & delivery remained robust. At Sam’s Club, e-commerce sales jumped 47% on the back of a robust direct-to-home show and solid curbside performance. In the International segment, e-commerce sales surged nearly 64%.

The Zacks Consensus Estimate for revenues is currently pegged at $136 billion, suggesting a dip of 1.3% from the prior-year quarter’s reported figure. The Zacks Consensus Estimate for earnings has risen by a cent over the past seven days to $1.54 per share, which indicates a 1.3% drop from the figure reported in the prior-year period.

Other Trends

Walmart is focused on strengthening its stores business, and has been undertaking several initiatives to enhance merchandise assortments. The company has also been focused on store remodeling, in an attempt to upgrade those with advanced in-store and digital innovations. These upsides helped its U.S. comp sales to increase for the 27th straight time in the last reported quarter.

However, the company, on its last earnings call, said that it expects to keep witnessing an inflationary environment, related to cost of goods and wages. Apart from this, management expects supply-chain hiccups, which, again, is a threat. In the fiscal second quarter, consolidated operating income is likely to have declined in the low- to mid-single-digit range, while the same is expected to have increased slightly on excluding divestitures. Earnings per share for the second quarter are anticipated to have decreased in low-single digits, while the same might have increased in low-single digits on excluding divestitures.

On the brighter side, the company expects continuation of pent-up demand throughout 2021. With more customers going out to shop in the United States, the company’s store environment is in good shape, while e-commerce also remains on the growth trajectory.

Walmart currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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