Key Takeaways

  • Adjusted EPS was $1.39 vs. the $1.50 analysts expected.
  • Revenue surpassed analyst expectations.
  • U.S. same-store sales growth was higher than the level analysts estimated.
  • Walmart plans to invest more in supply chain capacity and automation.

What Happened

Walmart reported adjusted EPS that missed analyst expectation in Q4 FY 2021. Those adjusted earnings barely changed from the year-ago quarter, up only slightly. Revenue beat analyst forecasts, rising to record levels. U.S. same-store sales growth was also higher than expected, driven by strong growth in Walmart's e-commerce sales.

(Below is Investopedia's original earnings preview, published February 17, 2021.)

What to Look For

Walmart Inc. (WMT), the largest U.S. retailer, began offering vaccinations for COVID-19 at its pharmacies last week. The company, with thousands of stores across the nation, has been enlisted by the federal government to help treat the virus that first upended the global economy about a year ago. Despite the economic disruption, Walmart has thrived by posting faster profit and sales growth.

Investors will be watching to see if Walmart has been able to maintain that performance when the company reports earnings on February 18, 2021 for Q4 FY 2021. Unlike many other companies closing out their 2020 fiscal year (FY), Walmart is reporting results for the final quarter of FY 2021, which ended January 31, 2021. Analysts are expecting both adjusted earnings per share (EPS) and revenue to rise at a faster pace than in Q4 FY 2020.

Investors will also focus on Walmart's same-store sales growth in the U.S., its biggest market. This key metric gauges a retailer's ability to generate revenue from established stores as opposed to newer stores that have recently opened. Analysts expect U.S. same-store sales growth to accelerate sharply from the year-ago pace, though it will be slower compared to each of the first three quarters of FY 2021.

Shares of Walmart have outpaced the broader market over the past year. The stock avoided the worst of the pandemic-induced market crash that began in late February 2020 and has mostly maintained the performance gap with the rest of the market throughout the rest of the year. That gap, however, has begun to narrow after the stock peaked in late November 2020. Walmart shares have provided a total return of 23.8% over the past 12 months, above the S&P 500's total return of 16.7%.

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

Walmart's financial performance has been a key force driving the shares during that period. During each of the first three quarters in FY 2021, both earnings and revenue growth have far outpaced growth during the same period a year earlier. Walmart's overall growth, nonetheless, has been modest, which is typical of a large company that has fully penetrated most of its major markets.

Walmart reported earnings that beat analyst estimates in Q3 FY 2021, which ended October 30, 2020. Adjusted EPS rose 15.7% as revenue grew 5.3% compared to the same three-month period a year ago. It was the strongest Q3 revenue growth in at least four years. The shift to online shopping amid the pandemic helped Walmart's e-commerce sales rise 79%. The retailer said that it saw increased demand for products across multiple categories.

Walmart's earnings in Q2 FY 2021 also beat analyst estimates by a significant margin. Adjusted EPS rose 23.0%, the fastest pace in at least 15 quarters. Revenue grew 5.7% compared to the year-ago quarter. The company's e-commerce sales rose 97% and demand for products across multiple categories increased.

Analysts expect continued growth in both Walmart's top and bottom lines in Q4 FY 2021. Adjusted EPS is forecast to rise 8.7% as revenue grows 4.6% compared to the year-ago quarter. For full-year FY 2021, analysts expect adjusted EPS to rise 13.3% as revenue grows 6.0%, the fastest pace for either metric in at least five years.

Walmart Key Metrics
  Estimate for Q4 2021 (FY) Q4 2020 (FY) Q4 2019 (FY)
Adjusted Earnings Per Share ($) 1.50 1.38 1.41
Revenue ($B) 148.1 141.7 138.8
U.S. Same-Store Sales Growth (%) 5.3 1.9 4.2

Source: Visible Alpha

As mentioned above, investors will also focus on growth in same-store sales (also called comparable store sales) 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. Same-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.

In the three fiscal years prior to FY 2021, U.S. same-store sales growth ranged from a low of 1.4% in Q1 FY 2018 to a high of 4.5% in Q2 FY 2019. In Q1 FY 2021, same-store sales growth accelerated to a pace of 10.0%, the fastest growth in at least 13 quarters. The pace decelerated to 9.3% YOY in Q2 and 6.4% in Q3.

Analysts expect Walmart's Q4 FY 2021 same-store sales growth to rise 5.3%, the slowest quarterly growth rate of FY 2021. Despite this, the estimated Q4 growth rate is robust compared to quarterly growth rates of same-store sales in the 12 quarters from FY 2018 to FY 2020. Walmart's results are likely to be similarly strong on an annual basis. For full-year FY 2021, analysts expect U.S. same-store sales to rise 7.8%, the fastest pace in at least five years.