Key Heading

  • Analysts estimate adjusted EPS of $1.20 vs. $1.18 in Q1 FY 2021.
  • U.S. Walmart comparable store sales growth is expected to slow dramatically compared to the same quarter a year ago.
  • Revenue is expected to decline as last year's boost from the COVID-19 pandemic subsides.

Walmart Inc. (WMT) has been one of the big winners during the COVID-19 pandemic, experiencing rising sales even amid the pandemic-related lockdowns. Walmart's e-commerce sales also boomed as many shoppers chose to shelter at home and do their shopping online. To maintain its online sales momentum, Walmart recently acquired Zeekit, a virtual fitting room platform catering to online fashion consumers.

Investors will be watching to see if Walmart can maintain its pandemic-fueled growth when it reports earnings on May 18, 2021 for Q1 FY 2022. Walmart's 2021 fiscal year (FY) ended Jan. 31, 2021. Analysts expect a significant slowdown from last year's strong results. Adjusted earnings per share (EPS) are expected to rise slightly as quarterly revenue declines for the first time in at least four years.

Investors will also focus on Walmart's U.S. comparable store sales growth, a key metric gauging the growth in sales of its Walmart-branded retail outlets located in the U.S. that have been open for at least one year. Analysts expect quarterly U.S. Walmart comparable store sales growth to rise, but at the slowest pace in at least four years.

Shares of Walmart have significantly underperformed the broader market over the past year. The stock's performance gap with the market began to significantly widen not long after releasing its Q3 FY 2021 earnings in mid-November. That report showed slowing sales growth and decreasing traffic at its stores amid the pandemic. Walmart's shares have provided a total return of 14.9% over the past year, well below the S&P 500's total return of 46.3%.

One Year Total Return for S&P 500 and Walmart
Source: TradingView.

Walmart Earnings History

The stock sank after Walmart reported Q4 FY 2021 earnings that missed analysts' expectations. Adjusted EPS rose just 0.8% compared to the year-ago quarter, the slowest pace since the final quarter of FY 2020. Revenue, which came in above expectations, grew 7.4%, a slightly faster pace than in the previous two quarters. The company highlighted its e-commerce sales for the quarter, which rose 69% year over year (YOY).

In Q3 FY 2021, adjusted EPS rose 15.8%, one of the fastest EPS gains in more than two years. Still that growth represented a slowdown from the exceptionally strong pace of 23.3% posted in the second quarter. Revenue grew 5.3% compared to the same three-month period a year ago, marking the slowest pace since Q4 FY 2020. Walmart indicated that its financial results for the quarter continued to be impacted by increased demand for numerous products amid the pandemic.

Analysts are expecting relatively weak financial performance in Q1 FY 2022. Adjusted EPS is expected to rise 1.9%, a marginal improvement from last quarter's subdued pace of growth. Revenue is expected to fall 2.3%, which would be the first quarterly decline in at least the past four years. For full-year FY 2022, analysts estimate adjusted EPS to fall 2.1% as revenue declines 2.3%. It would be the first annual declines in the top and bottom lines in at least five years.

Walmart Key Stats
Estimate for Q1 2022 (FY) Q1 2021 (FY) Q1 2020 (FY)
Adjusted Earnings Per Share ($)  1.20 1.18 1.13
Revenue ($B) 131.5 134.6 123.9
U.S. Walmart Comparable Store Sales Growth (%)  0.8 10.0 3.4

Source: Visible Alpha

The Key Metric

As mentioned above, investors will also focus on growth in comparable store sales (also called same store sales) for the company's Walmart-branded stores located in the U.S. This key metric encompasses revenue generated by Walmart's U.S. stores that have been open during the previous 12 months, and includes the company's e-commerce sales. Comparable store sales growth gauges a company's ability to generate additional revenue from established stores. If the bulk of a company's sales are being generated by established stores as opposed to new ones, this is a good sign that the company's products have not yet saturated the local market.

Last year was an exceptional one for comparable store sales at Walmart's U.S. stores. Annual comparable sales rose 8.6%, the fastest pace in at least four years. Quarterly comparable store sales rose as high as 10.0% YOY in Q1 FY 2021, the fastest pace in at least 13 quarters. However, the first quarter was the peak as comparable store sales growth slowed to 6.4% by Q3. The pace picked up slightly to 8.6% in the final quarter. However, analysts are expecting comparable store sales to rise just 0.8% in Q1 FY 2022, which would be the slowest pace in at least 17 quarters. For full-year FY 2022, analysts expect annual U.S. Walmart comparable store sales to rise 1.6%, which would be the slowest pace in at least five years.