Operating and net income gains at Walmart exceeded revenue growth in the second quarter, satisfying a previously announced company priority of driving return on investment faster than sales and, ultimately, profits while also ushering in a beat on Wall Street estimates.
As it introduced its second-quarter financial results, Walmart revealed that Judith McKenna, president and CEO of Walmart International, is retiring. Kath McLay, Sam’s Club president and CEO, will take her spot at Walmart International. Meanwhile, Chris Nicholas, Walmart U.S. COO, will assume McLay’s role.
In announcing the financial results, Walmart president and CEO Doug McMillion noted that the combination of value and convenience the company offers today is satisfying the key needs of consumers and helping boost results.
Walmart’s consolidated net income was $7.89 billion, or $2.92 per diluted share, versus $5.15 billion, or $1.88 per diluted share, in the year-before period, the company stated. Adjusted for one-time events, earnings per diluted share were $1.84 versus $1.77 in the year-previous period.
A Yahoo Finance analyst consensus estimate called for earnings per share of $1.70 and revenues of $160.27.
Net sales increased to $160.28 billion as revenues advanced to $161.63 billion versus $151.38 billion and $152.86 billion, respectively, in the year-earlier quarter, the company reported. As such, sales increased 5.9% and revenue increased 5.7% year over year. Operating income was up 6.7% to $7.32 billion from $6.85 billion in the period a year earlier while adjusted operating income was up 8.1% to $7.41 billion from $6.85 billion as Walmart posted no adjustment to the operating income figure in the quarter a year past.
At Walmart U.S. net sales gained 5.4% to $110.9 billion as comparable sales, excluding fuel impact, grew 6.4% based on a transactions increase of 2.9% and an average ticket increase of 3.4% with an e-commerce comp contribution of about 230 basis points. Operating income advanced 7.6% to $6.1 billion.
At Sam’s Club, net sales slipped 0.3% to $21.8 billion but sales excluding fuel increased 5.3% to $18.9 billion. Comparable sales, sans fuel, grew 5.5% based on a transactions increase of 2.9% and an average ticket increase of 2.5% with an e-commerce comp contribution of about 150 basis points. Operating income advanced 22% in the quarter year over year to $500 million.
In a conference call, McMillon said, “We had another strong quarter. We’re gaining share across markets and formats, growing units sold, transaction counts are positive across markets and growth in operating income is outpacing sales. We’re really pleased with our first-half performance. For the quarter, comp sales for Walmart U.S. were ahead of where we thought they’d be at 6.4%. Sam’s Club was 5.5% and sales for international were up 11%.”
He characterized Walmart today as a people-led tech-powered omnichannel retailer dedicated to helping people save more and live better. As such, Walmart is positioned for growth.
“We can serve people how they want to be served whether that’s in a store, club, picking up an order curbside or having it delivered,” McMillon said.
On the food side, McMillion said customers increasingly are purchasing staples and meal items, suggesting they are eating more at home. He noted that general merchandise did better in the quarter than expected, giving Walmart more confidence in segments under that umbrella through the end of the year. McMillon said a strong back-to-school response is evidence that general merchandise will have momentum going into the fall and the holiday season. In the quarter, home, apparel and hardlines did particularly well on Walmart Marketplace.
In announcing the financial results for the second quarter, McMillon said, “Around the world, our customers and members are prioritizing value and convenience. They’re shopping with us across channels: in stores, Sam’s Clubs, and they’re driving e-commerce, which was up 24% globally. Food is a strength, but we’re also encouraged by our results in general merchandise versus our expectations when we started the quarter. Our associates helped deliver increases in transaction counts and units sold, and profit is growing faster than sales. We’re in good shape with inventory, and we like our position for the back half of the year.”
