- Analysts estimate adjusted EPS of $1.50 vs. $1.39 in Q4 FY 2021.
- U.S. comparable sales, excluding fuel sales, are expected to rise YOY, but at a slower pace compared to the year-ago quarter.
- Revenue is expected to fall slightly as the positive boost from the pandemic wears off.
Walmart Inc. (WMT), one of the world's biggest retailers, has enjoyed strong profit and revenue growth as consumers have changed their buying patterns during the COVID-19 pandemic. Its e-commerce sales, for example, expanded dramatically as consumers spent more money on groceries and household goods—and less on eating out and traveling. Massive government stimulus spending also put money in consumers' pockets, bolstering Walmart's in-store and online sales.
Investors will focus on whether Walmart can maintain that growth—as the boost from the pandemic begins to wear off—when it reports earnings on Feb. 17, 2022 for Q4 FY 2022. Walmart's fiscal year (FY) ended Jan. 31, 2022. Analysts expect adjusted earnings per share (EPS) to rise, but at a slower pace, as revenue falls slightly.
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 comparable sales to rise YOY, but at a slower rate compared to the previous quarter and the year-ago quarter.
Shares of Walmart have underperformed the broader market over the past year. The stock's movement has been volatile but its underperformance gap with the rest of the market has generally widened over the past year. Walmart's shares have provided a total return of -6.6% over the past year, well below the S&P 500's total return of 11.9%.
Walmart Earnings History
Walmart reported Q3 FY 2022 earnings results that beat analysts' expectations. Adjusted EPS rose 8.0% compared to the year-ago quarter, continuing a slowing trend begun in the previous quarter. Revenue grew 4.3% year over year (YOY), accelerating slightly from the previous quarter's pace. 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.
In Q2 FY 2022, Walmart beat consensus estimates in both adjusted EPS and revenue. Adjusted EPS increased 13.9% YOY, decelerating dramatically from the first quarter's pace of 42.7% YOY. Revenue rose 2.4% compared to the year-ago quarter, marking the slowest pace of growth since the final quarter of FY 2020. Walmart noted that its revenue was negatively impacted by about $8.9 billion related to divestitures, but added that it continued to grow market share in U.S. grocery sales.
Analysts expect Walmart's adjusted EPS to continue decelerating in Q4 FY 2022, rising 7.5% YOY. It would be the slowest pace of growth since the fourth quarter of FY 2021. Revenue is forecast to decline 0.2% compared to the year-ago quarter, which would be the first decline out of any quarter in at least the past four years. For full-year FY 2022, analysts expect adjusted EPS to rise 16.7%, which would be the fastest pace of growth in at least five years. Annual revenue, is expected to expand 2.2%, slowing from the pace of 6.7% achieved in FY 2021.
|Walmart Key Stats|
|Estimate for Q4 FY 2022||Q4 FY 2021||Q4 FY 2020|
|Adjusted Earnings Per Share ($)||1.50||1.39||1.38|
|U.S. Comparable Sales Growth, excluding fuel (YOY%)||6.1||8.9||1.8|
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 the first quarter of FY 2021, growth accelerated to 10.3% YOY before slowing slightly to 9.9% YOY in Q2 and again to 7.1% YOY in Q3. But those rates of growth were all faster than in any quarter during the previous two years. Growth accelerated to 8.9% YOY in Q4 FY 2021. While growth decelerated in the first two quarters of FY 2022, first to 6.2% YOY in Q1 and then to 5.5% YOY in Q2, it picked up again to 9.9% YOY in the third quarter. Analysts expect comparable sales growth to decelerate in Q4 FY 2022, forecasting a rise of 6.1% YOY. For full-year FY 2022, analysts expect comparable sales to rise 7.0%. While that growth rate would be slower than the previous year, it still would be dramatically faster than any of the five years prior to FY 2021.
Visible Alpha. "Financial Data."
The Wall Street Journal. "Walmart Flexes Its Scale to Power Through Pandemic."
Walmart Inc. "Earnings Release (FY22 Q3)," Page 1.
The Wall Street Journal. "Walmart Sales Growth Helped by Stimulus."
Bloomberg. "Retail’s Battle With Covid Actually Saved Its Stores."
Walmart Inc. "Q2 FY22 Earnings Release," Page 1.
Walmart Inc. "Form 10-K for the fiscal year ended January 31, 2021," Page 33.