Walmart(WMT) is a retail titan, the world's largest private-sector employer. And for a long time the Dow Jones stock was a huge growth winner for investors. Walmart continues to lock horns with online behemothAmazon.com(AMZN) and recently posted an earnings beat. So is Walmart stock a good buy right now? Read on.
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Walmart has mammoth revenue. It came in at $559 billion in fiscal 2021. However, its size is also a weakness, as sales growth was a tepid 6.7%. Achieving substantial growth is difficult for such a large retail company.
Sam Walton founded the company in 1969, but the discount giant isn't resting on its laurels. E-commerce sales have been surging with a strong performance at Walmart.com, including its online groceries. However, the vast majority of its revenue still comes from its brick-and-mortar stores. Meanwhile, Amazon has a foothold in physical retail through its Whole Foods chain.
Walmart Profits Warnings
Walmart stock was hammered after the firm issued a profit warning on July 25.
It said it expected adjusted earnings per share for the full year to fall 11% to 13%, compared with a forecast in May for a roughly 1% drop.
The company, in revising its forecasts, cited "pricing actions aimed to improve inventory levels at Walmart and Sam's Club in the U.S."
"Food inflation is double-digits and higher than at the end of Q1. This is affecting customers' ability to spend on general merchandise categories and requiring more markdowns to move through the inventory, particularly apparel," Walmart said in a statement.
However the firm also said it had made progress reducing inventory, managing prices to reflect certain supply-chain costs and inflation, and reducing storage costs associated with a backlog of shipping containers.
Walmart Earnings Beat
Following the warning, Walmart went on to post EPS of $1.77 a share on August 16. This was above analyst estimates for $1.62 per share. Revenue of $152.9 billion was also above expectations.
Much of that sales gain reflects higher prices, which are responses to rising costs.
Walmart also signaledit's getting a handle on its inventory.
"The actions we've taken to improve inventory levels in the U.S., along with a heavier mix of sales in grocery put pressure on profit margins for Q2 and our outlook for the year," CEO Doug McMillon said in a statement.
Executives told analysts Tuesday that Walmart canceled billions of dollars in orders to help align inventory levels with expected demand. Fewer goods and higher prices resulted in strong revenue as Walmart reported that "mid-to higher-income customers" are flocking to its stores.
It also updated its outlook, saying it now sees full-year adjusted EPS down 9%-11%. For Q3, Walmart expects net sales growth of about 5% along with a 9%-11% decline in adjusted EPS.
Walmart Stock Analysis
Walmart stock now sits near the lows of a consolidation pattern. The buy point here is 160.87,MarketSmith analysis shows.$Amazon.com(AMZN)$
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