Walmart May Post Declining Q3 Profit as Retail Slumps

Focus on WMT total U.S. comparable sales growth

Walmart store
Getty Images / Sundry Photography

Key Takeaways

  • Analysts estimate Walmart will report adjusted EPS of $1.31 vs. $1.45 in Q3 FY 2022 on Nov. 15.
  • Total U.S. comparable sales (excluding fuel sales) are expected to rise, though at a decelerating pace.
  • Revenue is expected to increase by the second-widest margin in nearly two years.

Walmart Inc. (WMT), the largest U.S. retailer by sales last year, will probably say on Nov. 15 that profit declined for a third straight quarter as inflation cools demand and inventory backlogs persist. The company's fiscal year ends in January.

Walmart probably earned $1.31 per share, compared with a profit of $1.45 a year earlier. Revenue is expected to rise by 4.8% to $147.2 billion, according to average estimates from Visible Alpha.

Demand for big-ticket and discretionary purchases sank in recent months as inflation boosts prices and customers rein in spending ahead of a potential recession. Supply chain issues and adjustments after the early stages of the pandemic also have led to excess inventory, which may force deep discounts heading into the holiday season. Walmart already cut its outlook for FY 2023.

A key measure of Walmart's performance is its total U.S. comparable sales growth, excluding fuel, which tends to be volatile due to gas price swings. The metric gauges the rate of growth generated by the company's existing stores and clubs in the U.S. as well as through e-commerce sales. Analysts expect total U.S. comparable sales growth excluding fuel to be 4.1%, less than half of the pace of a year ago.

Walmart shares cratered in May 2022 and have gradually recovered since then. They dropped 2% in the last year, compared with about a 15% decline for the S&P 500 Index (see chart below).

1-year trailing total return for Walmart and the S&P 500
Source: TradingView.

Walmart Earnings History

Walmart's profit surged early in the COVID-19 pandemic, but growth slowed throughout FY 2022. Both of the two most recent quarters brought declines in profit. Analysts expect a third straight decline for Q3 2023.

Walmart's revenue has grown at a generally modest pace in recent years. Analysts predict revenue climbed by 4.8% for the latest quarter, a slightly faster pace than a year ago.

Walmart Key Stats
  Estimate for Q3 FY 2023 Q3 FY 2022 Q3 FY 2021
Adjusted Earnings Per Share ($) 1.31 1.45 1.34
Revenue ($B) 147.2 140.5 134.7
Comparable Sales Growth (YOY) (%) 4.1 9.9 7.1

Source: Visible Alpha

The Key Metric

Walmart's total U.S. comparable sales, also referred to as same-store sales, measures the sales performance of the company's U.S. stores and clubs that have been open during the previous 12 months. It includes e-commerce sales. The metric 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, it's a sign that the company's products haven't yet saturated the local market.

Walmart's total U.S. comparable sales growth surged to a multi-year high in Q1 FY 2021 and has trended downward since that time. It briefly spiked for Q3 FY 2022. Analysts predict total U.S. comparable sales growth slowed in Q3 FY 2022, slipping to the second-slowest pace in nearly three years.

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  1. CNBC. "Retailers’ Biggest Holiday Wish Is to Get Rid of All That Excess Inventory."

  2. National Retail Federation. "Top 100 Retailers 2022 List."

  3. Visible Alpha. "Financial Data."

  4. CNBC. "Walmart Shares Slump After Retailer Cuts Profit Outlook on Inflation Concerns."

  5. Walmart Inc. "Form 10-K for the Fiscal Year Ended Jan. 31, 2022," Page 34.

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