Proactive Investors - Walmart Inc (NYSE:WMT) stock traded nearly 2% lower in Thursday’s exchanges in New York despite fairly upbeat earnings from the supermarket retailer, with a broader macroeconomic malaise cited for the tepid reaction on Wall Street.
The Bentonville, Arkansas-based firm earlier today raised its guidance for the second quarter in a row after reporting revenue and earnings above expectations.
Walmart said the increase reflected "Q2 upside, confidence in continued business momentum and ongoing customer response to its value proposition".
For the three months to July 31, 2023, the flagship retailer reported revenue rose 5.7% to $161.6 billion from $152.9 billion the year before, ahead of forecasts of $160.27 billion, while adjusted EPS rose 4% to $1.84 from $1.77, compared to the $1.71 consensus.
The increase reflected "Q2 upside, confidence in continued business momentum and ongoing customer response to its value proposition".
A closer look at the results
The retailer highlighted notable strength in the food segment, whilst it specifically pointed to a positive performance in general merchandise, compared to prior expectations.
Albeit categories like apparel, home goods, and sporting goods experienced some decline.
E-commerce sales were up 24%, driven by pick-up and delivery services, meanwhile, it claimed significant market share gains in groceries.
Walmart's global advertising business reported 35% growth.
Elsewhere, international sales increased by 13%, with its majority-owned Mexican venture Walmex a notable driver alongside its operation in China, and, majority owned Indian business Flipkart also noted contributors.
Market reaction
At US$156.25 per share, Walmart stock was down US$3.01 or 1.89% by midday in New York.
It is, however, worth noting Walmart’s relative strength in 2023 which sees the stock up some US$13.55 or 9.4% in the year to date, potentially allowing for some light profit-taking in the wake of today’s earnings announcement.
Analysts were broadly positive following the earnings and subsequent investor call.
Oliver Chen from TD (TSX:TD) Cowen noted Walmart's strength in inventory management and the growth in advertising, marketplace, and Walmart+ memberships. CFRA’s Arun Sundaram described it as a “solid quarter” and pointed to the company's potential to maintain its momentum.
Meanwhile, Goldman Sachs (NYSE:NYSE:GS) Kate McShane expects the stock to trade higher.
The stock price action meanwhile suggests that investors may be adopting a more cautious approach, possibly in light of broader economic concerns and the performance of other retail giants – like Target (NYSE:TGT) which yesterday slashed guidance despite slightly improving margins.
Target chief executive Brian Cornell yesterday told investors it was taking a “cautious approach” as grocery and big-box retailer clipped its forecasts “guidance in anticipation of continued near-term challenges on the topline."
It appears investors are, for now, hedging their bets on supermarket retail.