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First-quarter sales at Walmart U.S. were 'ahead of plan,' according to McMillon, including gains of 4% in net sales and 3% in comparable sales excluding fuel.

Walmart tallies Q1 sales gains despite earnings miss

Company ‘not happy with the profit performance for the quarter,” CEO Doug McMillon says

Walmart generated solid sales gains in its U.S. business for the fiscal 2023 first quarter but fell short of Wall Street’s earnings forecast, in part due to the nation’s unstable economic conditions.

For the quarter ended April 30, net sales totaled $140.29 billion, up 2.3% from $137.16 billion a year earlier, Walmart said Tuesday. In constant currency, net sales rose 2.6% to $140.66 billion. Overall revenue, including membership and other income, increased 2.4% to $141.57 billion and was up 2.6% to $141.95 billion in constant currency, the Bentonville, Ark.-based retailer reported.

Those gains built on growth of 2.6% in net sales and 2.7% in revenue (+2.1% in constant currency) in the fiscal 2022 first quarter.

“We had a good quarter from a top-line point of view. Sales for the period were ahead of what we expected across all segments, and we’re pleased with the momentum we see so far in Q2,” Walmart President and CEO Doug McMillon told analysts in a conference call on Tuesday. “The bottom line was below our expectations due primarily to three areas that negatively affected operating income in our U.S. businesses, both in Walmart and Sam’s Club. Each of these items represents about one-third of our overall profit miss.”

At the bottom line, first-quarter net income attributable to Walmart came in at $2.05 billion, or 74 cents per diluted share, versus $2.73 billion, or 97 cents per diluted share, a year ago. On an adjusted basis, diluted net earnings per share (EPS) were $1.30, excluding a net impact of 56 cents from unrealized and realized gains/losses on equity investments, Walmart said. That compared with adjusted net EPS of $1.69 in the fiscal 2022 quarter, which excluded a net impact of 74 cents from unrealized and realized investment gains/losses and 15 cents from an incremental loss on sale of operations in the United Kingdom and Japan.

Analysts, on average, had projected first-quarter 2023 adjusted EPS of $1.48, with estimates ranging from $1.41 to $1.67, according to Refinitiv.

McMillon said the earnings miss reflects impacts involving wage expense, general merchandise inventory, and fuel costs and Walmart’s supply chain. He noted that, after the Omicron surge, more workers returned faster than the company expected, lifting wage costs. Meanwhile, GM represented a lower percentage of total sales in Q1, resulting in an “unfavorable gross margin mix,” and the company was hit with higher costs for containers and storage, he said.

“As it relates to Walmart U.S. general merchandise sales, we knew that we were up against stimulus dollars from last year. But the rate of inflation in food pulled more dollars away from GM than we expected, as customers needed to pay for the inflation in food. We like the fact that our inventory is up because so much of it is needed to be in-stock on our side counters, but a 32% increase is higher than we want. We’ll work through most or all of the excess inventory over the next couple of quarters,” McMillon explained.


Amid elevated inflation, Walmart will aim to keep prices as low as possible, namely on opening price-point food items, according to McMillon.

“As we managed the quarter, we generally passed on cost increases from suppliers at a category cost-of-goods level, but fuel costs accelerated during the quarter faster than we were able to pass them through, creating a timing issue. Fuel ran over $160 million higher for the quarter in the U.S. than we forecasted. We made progress matching pricing to the increased costs as the quarter progressed, and while we expect some gross margin pressure in Q2, we expect an improvement over Q1,” he said. “We’re not happy with the profit performance for the quarter, and we’ve taken action, especially in the latter part of the quarter, on cost negotiations, staffing levels and pricing while also managing our price gaps.

“While we’ve experienced high levels of inflation in our international markets over the years, U.S. inflation being this high and moving so quickly both in food and general merchandise is unusual,” McMillon noted. “We’ll control what we can control, reduce our inventory level and keep prices as low as we can — especially on opening price-point food items — while improving our profit performance.”

At Walmart U.S., first-quarter 2023 net sales advanced 4% to $96.9 billion from $93.17 billion a year earlier. Comparable sales gained 3.5% year over year but, excluding fuel, were up 3%. Walmart said the average ticket size grew 3%, though transaction count was flat. Those gains built on increases of 5% in net sales, 6.2% in comp sales (6% excluding fuel) and 9.5% in ticket size in the 2022 quarter, when transactions dipped 3.2%.

“In Walmart U.S., our sales performance was ahead of plan, and we continued to gain share in grocery,” McMillon said in the call. “Inflation is lifting the average ticket, and our transaction count in stores went up slightly versus last year. Overall basket size is up as you would expect, but units per basket are down a bit. Price leadership is especially important right now, and one-stop shopping becomes more than just convenience when people are paying over $4 a gallon for fuel.”

E-commerce sales for Walmart U.S. edged up 1% in the first quarter yet accounted for a 30-basis-point negative impact on comparable sales, according to Walmart. A year ago, digital sales jumped 37% and contributed about 360 basis points to comp sales.

“We’re making progress on the e-commerce experience as in-stock improves and the team continues to improve on the app and site experience and delivery accuracy and speed,” said McMillon. “Our e-commerce operations were affected early in the quarter as we lost one of our largest fulfillment centers to a fire, which created some cost inefficiencies for us. The buildings were destroyed but, thankfully and most importantly, no one was hurt. The loss did put strain on our system, however. The team quickly reacted to utilize our stores and spread volume to our other FCs to fulfill e-commerce orders. I’m proud of the team for moving so quickly to keep orders flowing to our customers.”


On a two-year stack, Walmart U.S. e-commerce sales were up 38% through the fiscal 2023 first quarter.

First-quarter 2023 net sales at Sam’s Club surged 17.5% to $19.62 billion from $16.69 billion in the prior-year period. Comp sales rose 17.1% overall but increased 10.2% excluding fuel. The average ticket size inched up 0.2% despite 10% growth in transactions. E-commerce sales climbed 22% at the top line and 1.5% on a comparable basis. Membership income rose 10.5%.

In the 2022 quarter, Sam’s recorded gains of 10.1% in net sales, 11.1% in comp sales, (7.22% excluding gas), 2.2% in transactions and 4.9% in average ticket size, while e-commerce sales increased 47% overall and 3.4% on a comp basis.

Net sales at Walmart International fell 13% to $23.76 billion in the 2023 first quarter from $27.3 billion billion a year ago. In constant currency, net sales declined 11.5% to $24.48 billion. The results compare with an 8.3% decrease in net sales (-11.4% in constant currency) in the 2022 quarter.

“Inflation is playing a role in the top and bottom line, and the pace of change created a timing issue for us in Q1. We’re adjusting to the mix change and operational costs,” McMillon told analysts in the call. “Importantly, we expect the solid top-line performance to continue, and we’re taking up sales guidance for the year. Customers and members are coming to us for value.”

Walmart now forecasts consolidated fiscal 2023 net sales to rise 4% in constant currency (4.5% to 5% excluding divestitures), and Walmart U.S. comparable sales to grow 3.5% excluding fuel. Previously, the company projected 3% overall net sales growth (4% excluding divestitures) and Walmart U.S. comp sales to edge up 3% excluding fuel.

For fiscal 2023, Walmart lowered its earnings guidance to a 1% decrease in adjusted EPS (flat excluding divestitures) from its earlier outlook of mid-single-digit growth (5% to 6% excluding divestitures). Analysts’ consensus fiscal 2023 estimate is for adjusted EPS of $6.76, with projections running from $6.35 to $7.30, according to Refinitiv.

As of April 30, Walmart 10,593 stores overall, including 5,342 in the U.S. (4,742 Walmart U.S. and 600 Sam’s Club stores) and 5,251 Walmart International stores.

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