To The Moon

Retail giant $Wal-Mart(WMT)$ report FY23 Q4 earnings ended in Jan 31. Strong result makes doubt beat again, but the cautious guidance failed market consensus.

Interestingly, WMT stock pulled back inter-trading after a 2%+ plunge before open, but  the biggest loser is its peer, $Target(TGT)$ , plunged nearly 5%. Why?

We noted in the last financial report,

Wal-Mart successfully managed the operation leverage, dealing with the increased supply chain and management costs during the pandemic  time, which enlarged the profit margin; However, Target continues to suffer supply chain problems, and its profit margins are not as good as expected. Therefore, the market believes Target's operation and management ability is slightly worse, which naturally shifts the pressure to it.

For details, please refers to Walmart UP and Target Down, How's the trend in supermarkets?

This quarter, Wal-Mart continued its well performance, beat market consensus.

• Revenue was US $164.05 billion, a year-on-year increase of 7.3%, significantly higher than Wall Street's expected US $159.72 billion;
• Non-GAAP adjusted EPS  $1.71, higher than the market expectation of $1.51, compared with $1.53 in the same period last year;
• Net profit was $6.28 billion, up from $3.56 billion in the same period last year.
• Same-store sales increased by 8.8% year-on-year, far exceeding the market expectation of 5.24%, among which same-store sales in the United States increased by 8.3% year-on-year, higher than the market expectation of 4.82%, member stores in Shan Mu increased by 12.2% year-on-year, higher than the market expectation of 8.44%, while e-commerce sales in the United States increased by 17% year-on-year.

Besidesm inventory has stoped increasing,  by only 0.1% year-on-year this quarter, which is the lowest level since Q2 2021, implying the company's supply chain problems have been alleviated.

Retailers' super performance can easily be linked with economic data. According to the CPI published in recent months.

1. Inflation of essential consumer goods(food) makes more consumers spend less on non-essential consumer goods(household suppliers),

2. Family credit card and debit card expenditures have increased significantly, and even hit the largest year-on-year growth rate since the summer of 2022 in January;

3. Compared with previous years, the warmer weather in January also increased consumers' expenditure on service consumption.

Therefore, this quarter's outstanding performance may come more from the macro level, so we think it will be similar to other similar retailers.

As for Guidance of next year, the company's gives

• Wal-Mart's U.S. same-store sales rose 2% to 2.5%, lower than the consensus market forecast of 3%
• Same-store sales at Sam member stores increased 5%, higher than market expectations of 4.4%
• Revenue growth excluding exchange rate was 2.5%-3%, which was lower than the market expectation of 3.6%
• Adjusted earnings per share were $5.9-$6.05, lower than the market expectation of $6.33.

Obviously, Wal-Mart is conservative, perhaps the market is too early to be optimistic.