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Walmart share price rallies on solid Q2 results

Walmart share price rallies on solid Q2 results

Walmart’s share price has pushed higher after the retailer announced solid numbers. EPS came in at $1.27, when traders were expecting $1.22, and revenue edged up by 1.8% to $130.38 billion, which was fractionally below forecasts. 

Same-store sales increased by 2.8%, the consensus estimate was 2.1%. The retailer confirmed that online sales jumped by 37% in the second quarter, and the surge in e-commerce shows the firm is expanding in an ever increasing section of the business. The retail warehouse division, Sam’s Club, posted an increase in net sales of 1.3%. 

Seeing as Walmart also raised its outlook for US comparable sales, EPS and operating profit, it is fair to say the group is firing on all cylinders. The US group owns Asda, and the division saw a slide in gross profit rate on account of softness in higher-margin general merchandise, and an increase in fuel sales with lower margins. 

Asda cautioned that Brexit uncertainty is hanging over the sector, although that hasn’t hurt deep discounters like Aldi and Lidl. Walmart tried to offload Asda to Sainsbury’s, but the Competition and Markets Authority blocked the move, and in the current climate the US company is unlikely to find another perspective suitor for the UK supermarket. Walmart are considering an IPO for Asda as a way of spinning off the company.

A strong start to the year boosts Walmart share price

Walmart had a strong start to the year as the group posted respectable first-half figures in May. EPS was $1.13, which comfortably topped the $1.02 forecast. Revenue edged by 1% to $123.9 billion, but the consensus estimate was $125 billion. Same-store sales in the US is a closely watched metric, and it increased by 3.4%, exceeding the 3.3% forecast. It is impressive that Walmart produced strong EPS when you take into account the group invested heavily in its supply chain and the online division. 

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The ramping up of capital expenditure appears to be paying off too, as online sales jumped by 37%, an improvement on the 33% jump in e-commerce sales one year previous. The firm is aiming for 35% online sales this year. 

Walmart takes on Amazon

While many traditional retailers have suffered at the hands of Amazon, Walmart has managed to hold its own, and that was reflected in the fact the Walmart share price hit a record-high last month. Walmart also announced a next-day delivery service in May, which covers 200,000 items. The service began in a few regions of US, and now covers about 75% of the country. The move was a reaction to Amazon’s decision to invest heavily in their ‘prime service’ which will offer one-day delivery for all its members. 

Walmart is determined to take the fight to Amazon, and that is why it snapped up a diversified range of online companies like Bare Necessities and Art.com. The group confirmed it is on track to have same-day grocery delivery from 1,600 outlets, and collection for online grocery delivery at 3,100 stores by the end of the year. Walmart are the largest retailer in the world, and they are keeping up with the changes in the sector. 

Earlier this week, the Trump administration confirmed the proposed tariffs that were set to be imposed on $300 billion worth of Chinese goods in September will be delayed until December. Products like footwear, clothing and electronics will avoid tariffs in the near term, and that should help shoppers on the run up to Christmas. The Walmart share price rallied on the news.



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