Company lowers profit outlook for Q2 and
FY23
Operating margin expected to be about 4.2%
for Q2 and 3.8% to 3.9% for FY23
Outlook for net sales higher for FY23 given
Q2 results, elevated by inflation
Walmart Inc. (NYSE: WMT) provided a business update today and
revised its outlook for profit for the second-quarter and
full-year, primarily due to pricing actions aimed to improve
inventory levels at Walmart and Sam’s Club in the U.S. and mix of
sales.
Comp sales for Walmart U.S., excluding fuel, are expected to be
about 6% for the second quarter. This is higher than previously
expected with a heavier mix of food and consumables, which is
negatively affecting gross margin rate. Food inflation is double
digits and higher than at the end of Q1. This is affecting
customers’ ability to spend on general merchandise categories and
requiring more markdowns to move through the inventory,
particularly apparel. During the quarter, the company made progress
reducing inventory, managing prices to reflect certain supply chain
costs and inflation, and reducing storage costs associated with a
backlog of shipping containers. Customers are choosing Walmart to
save money during this inflationary period, and this is reflected
in the company’s continued market share gains in grocery.
“The increasing levels of food and fuel inflation are affecting
how customers spend, and while we’ve made good progress clearing
hardline categories, apparel in Walmart U.S. is requiring more
markdown dollars. We’re now anticipating more pressure on general
merchandise in the back half; however, we’re encouraged by the
start we’re seeing on school supplies in Walmart U.S.” said Doug
McMillon, Walmart Inc. president and chief executive officer.
Guidance updates
Based on the current environment and the company’s outlook for
the remainder of the year, it is providing the following updates to
its guidance.
- Consolidated net sales growth for the second quarter and full
year is expected to be about 7.5% and 4.5%, respectively. Excluding
divestitures1, consolidated net sales growth for the full year is
expected to be about 5.5%.
- Net sales include a headwind from currency of about $1 billion
in the second quarter. Based on current exchange rates, the company
expects a $1.8 billion headwind in the second half of the
year.
- The company maintains its expectations for Walmart U.S. comp
sales growth, excluding fuel, of about 3% in the back half of the
year.
- Operating income for the second-quarter and full-year2,3 is
expected to decline 13 to 14% and 11 to 13%, respectively.
Excluding divestitures1, operating income for the full year2 is
expected to decline 10 to 12%.
- Adjusted earnings per share4 for the second quarter and full
year is expected to decline around 8 to 9% and 11 to 13%,
respectively. Excluding divestitures1, adjusted earnings per share4
for the full year is expected to decline 10 to 12%.
1The company completed the sale of its operations in the U.K.
and Japan in the first quarter of fiscal 2022.
The company’s updated guidance includes the effects of the
following discrete items in the second quarter:
- Proceeds from an insurance settlement for Walmart Chile, which
positively affects operating income by $173 million and adjusted
earnings per share by $0.05
- Proceeds from a special dividend received by the company
related to its equity investment in JD.com, which positively
affects other gains and losses by $182 million and adjusted
earnings per share by $0.05
The company will provide further details on business performance
and its outlook for the year when it reports second-quarter results
on Aug. 16, 2022.
About Walmart
Walmart Inc. (NYSE: WMT) helps people around the world save
money and live better - anytime and anywhere - in retail stores,
online, and through their mobile devices. Each week, approximately
230 million customers and members visit more than 10,500 stores and
numerous eCommerce websites under 46 banners in 24 countries. With
fiscal year 2022 revenue of $573 billion, Walmart employs
approximately 2.3 million associates worldwide. Walmart continues
to be a leader in sustainability, corporate philanthropy and
employment opportunity. Additional information about Walmart can be
found by visiting https://corporate.walmart.com, on Facebook at
https://facebook.com/walmart and on
Twitter at https://twitter.com/walmart.
1The company completed the sale of its operations in the U.K.
and Japan in the first quarter of fiscal 2022.
2Growth rates reflect an adjusted basis for prior year results,
which excludes business restructuring charges in the fourth quarter
of fiscal 2022.
3Based on current foreign exchange translation rates, operating
income includes estimated negative impacts of about $60 million and
$100 million for the second quarter and fiscal 2023,
respectively.
4Growth rates reflect an adjusted basis for prior year results,
which exclude gains and losses on the Company’s equity investments,
business restructuring charges, loss on extinguishment of debt
recorded during the third quarter of fiscal 2022 and the
incremental loss on the sale of the Company’s operations in the
U.K. and Japan recorded during the first quarter of fiscal
2022.
Forward-looking
statements
This release contains statements regarding Walmart management’s
forecasts and guidance of or for consolidated net sales
performance, comparable sales performance for its Walmart U.S.
segment, consolidated operating income performance, adjusted
earnings per share, and the impacts of foreign currency exchange
rates, in each case, for the three month period ending July 31,
2022 and the full fiscal year ending January 31, 2023. Walmart
believes such statements may be deemed to be "forward-looking
statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended (the "Act") and are intended to
enjoy the protection of the safe harbor for forward-looking
statements provided by the Act as well as protections afforded by
other federal securities laws. Assumptions on which such
forward-looking statements are based are also forward-looking
statements. Such forward-looking statements are not statements of
historical facts, but instead express our estimates or expectations
for our consolidated, or one of our segment's or business’,
economic performance or results of operations for future periods or
as of future dates or events or developments that may occur in the
future or discuss our plans, objectives or goals.
Our actual results may differ materially from those expressed in
or implied by any of these forward-looking statements as a result
of changes in circumstances, assumptions not being realized or
other risks, uncertainties and factors including: the impact of the
COVID-19 pandemic on our business and the global economy; economic,
capital markets and business conditions; trends and events around
the world and in the markets in which we operate; currency exchange
rate fluctuations, changes in market interest rates and market
levels of wages; changes in the size of various markets, including
eCommerce markets; unemployment levels; inflation or deflation,
generally and in particular product categories; consumer
confidence, disposable income, credit availability, spending
levels, shopping patterns, debt levels and demand for certain
merchandise; the effectiveness of the implementation and operation
of our strategies, plans, programs and initiatives; unexpected
changes in our objectives and plans; the impact of acquisitions,
investments, divestitures, and other strategic decisions; our
ability to successfully integrate acquired businesses; changes in
the trading prices of certain equity investments we hold;
initiatives of competitors, competitors' entry into and expansion
in our markets, and competitive pressures; customer traffic and
average transactions in our stores and clubs and on our eCommerce
websites; the mix of merchandise we sell, the cost of goods we sell
and the shrinkage we experience; our gross profit margins; the
financial performance of Walmart and each of its segments,
including the amounts of our cash flow during various periods; the
amount of our net sales and operating expenses denominated in the
U.S. dollar and various foreign currencies; commodity prices and
the price of gasoline and diesel fuel; supply chain disruptions and
disruptions in seasonal buying patterns; the availability of goods
from suppliers and the cost of goods acquired from suppliers; our
ability to respond to changing trends in consumer shopping habits;
consumer acceptance of and response to our stores, clubs, eCommerce
platforms, programs, merchandise offerings and delivery methods;
cyber security events affecting us and related costs and impact to
the business; developments in, outcomes of, and costs incurred in
legal or regulatory proceedings to which we are a party or are
subject, and the liabilities, obligations and expenses, if any,
that we may incur in connection therewith; casualty and accident
related costs and insurance costs; the turnover in our workforce
and labor costs, including healthcare and other benefit costs; our
effective tax rate and the factors affecting our effective tax
rate, including assessments of certain tax contingencies, valuation
allowances, changes in law, administrative audit outcomes, impact
of discrete items and the mix of earnings between the U.S. and
Walmart's international operations; changes in existing tax, labor
and other laws and regulations and changes in tax rates including
the enactment of laws and the adoption and interpretation of
administrative rules and regulations; the imposition of new taxes
on imports, new tariffs and changes in existing tariff rates; the
imposition of new trade restrictions and changes in existing trade
restrictions; adoption or creation of new, and modification of
existing, governmental policies, programs, initiatives and actions
in the markets in which Walmart operates and elsewhere and actions
with respect to such policies, programs and initiatives; changes in
accounting estimates or judgments; the level of public assistance
payments; natural disasters, changes in climate, geopolitical
events, global health epidemics or pandemics and catastrophic
events; and changes in generally accepted accounting principles in
the United States.
Our most recent annual report on Form 10-K and subsequent
quarterly report on Form 10-Q filed with the SEC discuss other
risks and factors that could cause actual results to differ
materially from those expressed or implied by any forward-looking
statement in the release and related management commentary. We urge
you to consider all of the risks, uncertainties and factors
identified above or discussed in such reports carefully in
evaluating the forward-looking statements in this release. Walmart
cannot assure you that the results reflected in or implied by any
forward-looking statement will be realized or, even if
substantially realized, that those results will have the forecasted
or expected consequences and effects for or on our operations or
financial performance. The forward-looking statements made today
are as of the date of this release. Walmart undertakes no
obligation to update these forward-looking statements to reflect
subsequent events or circumstances.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220725005841/en/
Investor Relations contact Dan Binder, CFA
Daniel.Binder@walmart.com
Media Relations contact Randy Hargrove (800) 331-0085
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