Walmart (NYSE: WMT) reported strong Q2 earnings with the company beating expectations on the top and bottom-line, however the stock was essentially unchanged. Some of the factors fueling the beat were strong grocery sales and back-to-school shopping.
The company reported strength in "back to normal" categories that were depressed during the pandemic like luggage, party supplies, and apparel. The company also increased its guidance for Q3 and the full-year. Overall, Walmart's stock has been a big winner since the stock market bottom in March 2020 with a more than 50% gain.
Inside the Numbers
In Q2, Walmart reported $1.78 in earnings per share, topping expectations of $1.57 per share. Revenue also topped expectations at $141.1 billion vs. $137.2 billion consensus expectations. To compare, in last year's Q2, the company had $137 billion in revenue and EPS of $1.55. Of course, these results were inflated due to the shutdowns with Walmart being one of the rare retailers granted an exception.
Equally important, the company also increased its forecast for the full-year with EPS between $6.20 and $6.35 and same-store sales growth in the range of 5% to 6%. It said that it is closely monitoring the delta variant but is not seeing any change in behavior. It also doesn't anticipate another round of shortages like last year.
In its conference call, the company said that it increased its market share in groceries and it hast continued to add new online shoppers and vendors on its marketplace. As its marketplace grows, its share of advertising revenue is also increasing.
The company also said that consumer behaviors have started to return to more normal patterns. One consequence is customers are going to stores more frequently but the average ticket size is declining. Overall, same-stores sales in Q2 increased by 5.2%, above expectations of 3.3%.
Like many companies, e-commerce sales significantly decelerated with consumers returning to old habits. In Q2, the company had 6% growth, a steep drop from 97% growth last year and deceleration from 37% growth in Q1. However over a 2 year period, e-commerce sales have more than tripled. For the full year, Walmart expects $75 billion in sales.
The company is feeling some limited impact from supply chain issues, however it's been able to deal with it better than many other companies due to its large size and the fact that it charters its own vessels which makes it less reliant on outside companies.
Stock Price Outlook
Walmart's stock has underperformed other retailers in 2021. However, the stock remains a compelling buy due to its e-commerce upside and the steady growth of its same-store sales. Additionally, it was able to maintain growth on a year over year basis despite facing tough comps due to the pandemic.
Overall, Walmart remains a high-quality stock that investors should look to accumulate on weakness.