Doug_McMillon_Walmart.jpg Walmart
CEO Doug McMillon says Walmart’s grocery delivery will “cover 40% of the U.S. population” by year’s end.

Walmart U.S. posts first-quarter revenue, comp-store gains

Stores business is “getting stronger,” says CEO McMillon

Walmart saw revenue edge up in its fiscal 2019 first quarter, including increased U.S. same-store sales, as the company topped Wall Street’s earnings forecast.

For the quarter ended April 30, Walmart totaled sales of $122.7 billion, up 4.4% from $117.5 billion a year earlier. Excluding currency fluctuations, revenue was up 2.7% to $120.7 billion, the Bentonville, Ark.-based company said Thursday.

Walmart U.S. sales rose 3.1% to $77.7 billion in the first quarter from $75.4 billion a year ago. U.S. comparable-store sales excluding fuel were up 2.1% (+2.2% with fuel), as the retailer saw slight gains in the average ticket (+1.3%) and traffic (+0.8%). E-commerce sales grew 1% year over year.

Operating income for the U.S. division decreased 3.1% to $3.9 billion in the quarter. Walmart said the decline reflects a revision in its corporate overhead allocations to operating segments, which meant that prior-year figures were recast for comparison purposes.

At Sam’s Club, first-quarter revenue came in at $13.6 billion, down 2.7% from $14 billion in the year-ago period. Comp-store sales excluding fuel climbed 3.8% (+5.4% with fuel). Traffic during the quarter rose 5.6%, while the average ticket dipped 1.8%. The warehouse club chain’s e-commerce sales were up 1%. Operating income fell 18.5% to $300 million.

Sales for Walmart International surged 11.7% to $30.3 billion (+4.5% to $28.3 billion in constant currency). Operating income for the division totaled $1.3 billion, up 11.1% (+0.2% to $1.1 billion in constant currency). Walmart said eight of 11 markets turned in same-store sales gains, including the company’s four largest markets.

"We delivered a solid first quarter, and we're encouraged by the continued momentum across the business,” President and CEO Doug McMillon said in a statement. “We're transforming to better serve customers. We are changing from within to be faster and more digital, while shaping our portfolio of businesses for the future. Our strong cash flow and balance sheet provide flexibility to do so.”

In his comments on U.S. results, McMillon noted that some of Walmart’s recent initiatives are bearing fruit.

“Overall, the stores business is getting stronger. We’re using technology in more ways to simplify work for associates so they can better serve customers. This is also helping with inventory flow and expense management,” he said. “The previously announced starting hourly wage rate increase took effect in February. But because we’re operating more efficiently, we were able to leverage expenses in our stores this quarter. We’re pleased that U.S. e-commerce delivered sales growth of 33% with strength at and online grocery.”

Walmart U.S. has continued to strengthen supercenters, according to McMillon. “We’ve improved our merchandising in areas like fresh food with better lighting, an expanded deli offer and an improved bakery layout to make it easier for customers to navigate,” he said.

This year, Walmart expects to expand online grocery pickup by around 1,000 stores to reach more than 2,100 locations nationwide.

“We’re also rolling out grocery delivery to about 800 stores by year-end, allowing us to cover 40% of the U.S. population with delivery. The e-commerce food business we’ve been building is important not only because of the volume it’s driving but, strategically, it’s helping to grow the number of omnichannel customers we serve,” McMillon said. “Omnichannel customers spend almost twice as much with us, and they also spend more in stores even after becoming omnichannel customers. In addition to grocery pickup, we have nearly 200 automated pickup towers in stores now, and we’ll have about 700 stores covered by year-end. Customers love to have choices in how they shop, and we’re positioning to serve them well.” 

On the earnings side in the first quarter, consolidated net income attributable to Walmart totaled $2.1 billion, or 72 cents per diluted share, compared with about $3 billion, or $1.00 per diluted share, a year earlier.

Adjusted earnings per share for the fiscal 2019 quarter were $1.14 and exclude the impact of an unrealized loss of 47 cents on an equity investment in due to a change in accounting principles, and a positive impact of 5 cents from an adjustment in the provisional amount recorded in the fiscal 2018 fourth quarter related to tax reform.

Analysts, on average, projected adjusted EPS of $1.12, with estimates ranging from a low of $1.06 to a high of $1.18, according to Thomson Reuters.

Walmart added that its acquisition of a majority stake in India e-commerce leader Flipkart, announced last week, is expected to negatively impact fiscal 2019 EPS by 25 cents to 30 cents if the transaction closes at the end of the second quarter.

As of April 30, Walmart had 11,717 stores worldwide, including 5,358 in the U.S. and 6,359 internationally. Domestic stores include 4,761 Walmart U.S. stores and 597 Sam’s Club locations.

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