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Walmart Q1 FY2023 Earnings Report Preview

Focus on WMT U.S. comparable sales growth

Key Takeaways

  • Analysts estimate adjusted EPS of $1.48 vs. $1.69 in Q1 FY 2022.
  • U.S. comparable sales (excluding fuel sales) are expected to rise YOY, but at less than half the pace of the same quarter a year ago.
  • Revenue is expected to barely increase for the second straight quarter as the boost from the pandemic continues to wear off.

Walmart Inc. (WMT), one of the world's biggest retailers, enjoyed unusually strong earnings and revenue growth during the past two years. The key driver was consumers who changed their buying patterns in several ways during the pandemic. Walmart's e-commerce sales soared as people sheltering at home boosted their shopping online. And consumers also spent more on manufactured goods as they spent less on dining out and traveling. But these pandemic-related forces are beginning to lose momentum. As a result, Walmart's growth has begun to slow sharply.

Investors will be watching whether Walmart can reverse its slowdown in growth when it reports earnings on May 17, 2022 for Q1 FY 2023. Walmart's 2022 fiscal year (FY) ended Jan. 31, 2022. Analysts expect adjusted earnings per share (EPS) to fall for the first time in more than two years as revenue barely expands.

Investors also will look at Walmart's U.S. comparable sales growth, excluding fuel. This metric measures the rate of growth generated by the company's existing stores and clubs in the U.S. as well as e-commerce sales. Analysts expect Walmart's comparable sales to grow at its slowest pace in more than two years.

Shares of Walmart have underperformed the market for most of the last year. However, Walmart pulled ahead of the market in early April and has been outperforming ever since. As a result, Walmart's shares have provided a total return of 8.7% over the past year, above the S&P 500's total return of -2.2%.

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

Walmart Earnings History

Walmart reported Q4 FY 2022 earnings results that surpassed analysts' expectations. Adjusted EPS rose 9.9% compared to the year-ago quarter, slightly accelerating from the previous quarter's pace. Revenue grew a sluggish 0.5% year over year (YOY), its slowest pace in at least 17 quarters. Walmart said that its business had a strong holiday season globally but that revenue was negatively impacted by $10.2 billion related to divestitures. The company also said that it was facing higher supply chain costs.

In Q3 FY 2022, Walmart's earnings and revenue beat consensus estimates. Adjusted EPS increased 8.0% YOY, its slowest pace since the final quarter of FY 2021. Revenue expanded 4.3% compared to the year-ago quarter, marking its fastest pace since the final quarter of FY 2021. The company said that its revenue was negatively impacted by about $9.4 billion related to divestitures during the quarter. Walmart also said that its gross profit margin decreased due primarily to increased supply chain costs and other factors.

Analysts expect a significant weakening of Walmart's results in Q1 FY 2023. Adjusted EPS is expected to fall 11.9% compared to the year-ago quarter, which would be the first decline since the final quarter of FY 2020. Revenue is expected to rise a tepid 0.7% YOY, barely accelerating from the previous quarter's pace. For full-year FY 2023, analysts expect adjusted EPS to rise 4.8%, its slowest pace since FY 2020. Annual revenue is forecast to grow 3.2%, slightly accelerating from the previous year's pace.

Walmart Key Stats
  Estimate for Q1 FY 2023 Q1 FY 2022 Q1 FY 2021
Adjusted Earnings Per Share ($) 1.48 1.69 1.18
Revenue ($B)  139.3 138.3 134.6
Comparable Sales Growth (YOY%) 2.4 6.2 10.3

Source: Visible Alpha

The Key Metric

As mentioned above, investors will also be watching another key metric, Walmart's U.S. comparable sales growth. Comparable sales, also referred to as same-store sales in the retail industry, measures the sales performance of the company's stores and clubs that have been open during the previous 12 months. The metric includes sales from Walmart's remodels, relocations, expansions, and conversions, as well as e-commerce sales. Comparable 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.

Walmart's U.S. comparable sales growth, excluding fuel, accelerated in FY 2021 during the pandemic. In the two years prior to the pandemic—FY 2019 and FY 2020—YOY quarterly growth rates for U.S. comparable sales ranged between approximately 2%-5%. In FY 2021, YOY growth ranged from around 7%-10%. It then decelerated through the first half of FY 2022, rising 6.2% in the first quarter and 5.5% in the second. YOY comparable sales growth then accelerated to a pace of 9.9% in the third quarter before slowing to a pace of 6.3% in the fourth. Analysts expect a significant deceleration in Q1 FY 2023, with comparable sales growing 2.4% YOY. That would be the slowest pace since the final quarter of FY 2020.

Article Sources
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  1. The Wall Street Journal. "Walmart Flexes Its Scale to Power Through Pandemic."

  2. Visible Alpha. "Financial Data."

  3. Walmart Inc. "Walmart To Host First Quarter Earnings Conference Call on May 17, 2022."

  4. Walmart Inc. "Earnings Release (FY22 Q3)."

  5. Walmart Inc. "Form 10-K for the fiscal year ended January 31, 2022," Page 34.

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