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- This October ’23 quarter saw a 1% EPS and revenue beat, while last October saw a 14% EPS beat on a 3% revenue beat, as last year rev grew 8.75% yoy, while EPS grew just 2% yoy;<\/li>\n
- The January ’24 quarter will be lapping January 23’s quarter where EPS beat by 13% and revenue beat by 3%, on revenue growth of 7% and EPS growth of 12%. The January ’24 quarter consensus is expecting 3.75% revenue growth on a drop in EPS of -5%.<\/li>\n
- In April ’23 revenue grew 7.5% while EPS grew 13% and April ’23 was another 13% EPS beat on a 3% revenue beat.<\/li>\n<\/ul>\n
Walmart facing tough comp’s through April ’24 or the next 2 quarters.<\/p>\n
The “unexpected legal expenses” were a surprise on the conference call, as nothing Walmart management ever does ever seems “unexpected”.<\/p>\n
One bright spot on the call, which I wasn’t aware of but is key to the brand’s future are the “store remodels” happening. Obviously that boosts SG&A expense, but I think it’s necessary. Since I try and engage friends and family (and people wonder why I’m single and have no friends) about Walmart and get their basic impressions as to whether they shop at the stores and try and get their impressions, the one thing I consistently hear is that the stores are dirty, or rather not neat, and it leaves shoppers with a less-than-favorable impression. I remember walking into my first Walmart in Kansas City, Kansas, in the early 1990’s after hearing about this great growth stock, and I was singularly unimpressed with the crates and pallets strewn around the store, particularly in the front of the store, and the aisles weren’t necessarily easily negotiable.<\/p>\n
Operating and SG&A expenses have been a remarkably steady 20% – 21% of revenue for Walmart the last 10 years, but this last quarter jumped to 22%. (Some of that may be the aforementioned “unintended legal expenses”.)<\/p>\n
Other than Jim Bianco, on X, (Twitter), who commented on Walmart’s “deflation” comments in the conference call today, I couldn’t find one analyst or strategist who made reference to the deflation comments, although with Walmart generating an expected $645 billion in revenue in fiscal ’24 (ends Jan ’24), and 50% to 70% of that being grocery, the “deflation” comments by Walmart management imply a continued decline in CPI, particularly the “Food-at-Home” segment, and that is Fed-friendly to say the least.<\/p>\n
Jim Bianco commented that Walmart was simply taking recent history and extrapolating it, but Jim may not realize how much Walmart does in “grocery” in terms of their market share, and more importantly, how important Walmart is to the average American consumer’s household food budget. This deflationary pattern Walmart may have seen before and therefore was comfortable in articulating it’s likely trend.<\/p>\n
I didn’t take the deflation comments as a warning or a negative. If food and grocery are deflating, Walmart can benefit from that in gross margin i.e. cost-of-goods-sold.\u00a0Walmart matters to food & grocery given their size, and that commentary was interest-rate friendly to say the least. (That’s my opinion – take it for what it’s worth.)<\/p>\n
Finally, as mentioned above Walmart’s revenue revisions continue to be revised higher following last Thursday’s earnings release and that’s very much a plus for the retail giant.<\/p>\n
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