Walmart tallies second-quarter sales gains

Walmart U.S. and Sam’s Club posted solid brick-and-mortar and e-commerce sales gains for the fiscal 2022 second quarter, building on pandemic-driven increases from a year ago.

The Bentonville, Ark.-based retail giant also exceeded Wall Street’s per-share earnings forecast, despite an $8.9 billion impact from divestitures on Walmart International’s results.

For the quarter ended July 31, overall revenue came in at $141.05 billion, up 2.4% from $137.74 billion a year earlier, Walmart said Tuesday. In constant currency, revenue edged up 0.6% to $138.62 billion. That compared with a revenue increase of 5.6%  (7.4% in constant currency) in the fiscal 2021 quarter.

Net sales at Walmart U.S. rose 5.3% to $98.19 billion in the second quarter from $93.28 billion a year ago. Comparable sales advanced 5.6% year over year and, excluding fuel, were up 5.2%, with growth of over 14% on a two-year stack. Transaction count grew 6.1% — led by stores — while the average ticket size shrank 0.8%, Walmart reported.

A year ago, when consumer demand remained elevated due to COVID-19, Walmart U.S. saw net sales surge by 9.5%, with comp sales up 9.1% (9.3% excluding fuel). And shopper activity was reversed: a 14% drop in transactions but 27% growth in ticket size.

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“The underlying business is strong, even as we navigate the many effects of the pandemic as well as government stimulus this year and last year,” Walmart President and CEO Doug McMillon told analysts in a fiscal 2022 Q2 conference call on Tuesday. “Customer behaviors changed during the quarter, as people were shopping with us more in stores than online. As that shift occurred, we gained market share in grocery.”

“Customer behaviors changed during the quarter, as people were shopping with us more in stores than online. As that shift occurred, we gained market share in grocery.” — Doug McMillon, Walmart

Walmart U.S. e-commerce sales were up 6% for the quarter, contributing 20 basis points to total comp sales growth, but rose 103% on a two-year basis, the company said. In the prior-year period, e-commerce sales surged by 97% and contributed 600 basis points to the comp sales gain.

“Even as e-commerce growth slowed, as we layered on top of tremendous growth last year, we feel good about our two-year stacks of comp sales and e-commerce growth,” McMillon said. “The good news for us is that we can serve them either way and, of course, they get to choose.”

Chief Financial Officer Brett Biggs noted that, as store traffic picked up during the quarter, Walmart U.S. saw comp sales rise each month. Meanwhile, e-commerce sales have more than doubled over the past two years, he said in the analyst call. By category, Walmart U.S. generated strong sales in grocery, health and wellness, and apparel, as well as in reopening segments like automotive, travel and party supplies.

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The U.S. business also is “off to a good start with the back-to-school season,” he added.

“Grocery sales were up 6%, including the benefit from modest ticket inflation and increased low double digits on a two-year stack basis,” Biggs said. “That results in $2.4 billion of growth in food sales year over year and about $5.5 billion of growth on a two-year stack. Strong price positioning, great fresh quality and improved in-stocks are driving results.”

At Sam’s Club, second-quarter net sales totaled $18.64 billion, up 13.9% from $16.38 billion in the prior-year period. Comp sales climbed 13.9% overall and 7.7% without fuel. The number of transactions grew by 5.1% and the average basket size by 2.5%. E-commerce sales jumped 27% during the quarter and contributed 180 basis points to comp-sales growth. Membership income rose 12.2%.

In the year-ago quarter, Sam’s Club recorded gains of 8.8% in net sales and 8.7% in comp sales (13.3% without fuel), with transactions up 8.7% and basket size up 4.3%, while e-commerce sales rose 39% and contributed 190 basis points to comp-sales growth.

“Sam’s Club delivered excellent results with strong growth in sales, membership and profit,” Biggs said of the fiscal 2022 quarter. “Comp sales grew 10.6% excluding fuel and tobacco and were up nearly 28% on a two-year stack basis, including strong e-commerce growth. Membership trends were also strong, as we achieved a new high for overall member counts, saw significantly higher renewal rates and delivered record Plus member penetration.”

CFO Brett Biggs said grocery sales grew by 6% in the quarter and by low double digits on a two-year basis.

Overall U.S. comp sales for Walmart, including Walmart U.S. and Sam’s Club, increased 6.8% for the second quarter and were up 5.5% excluding fuel.

Fiscal 2022 second-quarter net sales at Walmart International dropped 15.2% to $23.04 billion from $27.17 billion a year earlier. In constant currency, the unit’s net sales were down 24% to $20.64 billion. That compared with a net sales decrease of 6.8% ( 1.6% in constant currency) in the 2021 quarter.

“Excluding divestitures, net sales increased nearly 13% in constant currency,” McMillon told analysts of the 2022 quarter’s international results. “E-commerce continues to play a bigger role for us. Net sales penetration for e-commerce was about 19% in Q2, an increase of more than 700 basis points from last year. We’re strengthening our omni-channel approach in Mexico, China and Canada.”

At the bottom line, Walmart’s net income for the second quarter totaled $4.28 billion, or $1.52 per diluted share, compared with $6.48 billion, or $2.27 per diluted share, a year ago, when the company saw net earnings rise nearly 80%.

Adjusted earnings per share (EPS) for the fiscal 2022 quarter were $1.78, well above the top end of Wall Street’s estimate. The company said adjusted EPS excludes a 26 cents-per-share net-of-tax impact of an unrealized and realized losses on equity investments.

Analysts, on average, had projected Walmart’s second-quarter adjusted EPS at $1.56, with estimates ranging from a low of $1.50 to a high of $1.65, according to Refinitiv.

Looking ahead, Walmart forecasts fiscal 2022 consolidated net sales growth (constant currency) of 6% to 7%, excluding divestitures. That includes comp sales growth of 5% to 6% (excluding fuel) at Walmart U.S. and of 7.5% to 8.5% (excluding fuel and tobacco) at Sam’s Club.

Walmart pegs adjusted EPS at $6.20 to $6.35 for fiscal 2022. Wall Street’s consensus estimate is for adjusted EPS of $6.02, with projections running from $5.85 to $6.41, according to Refinitiv.

“Recent quarters have demonstrated more than ever that our omnichannel strategy is the right one, as we serve customers regardless of how they want to shop,” said McMillon. “There are occasions when people want to visit a store, times when they want to pick up and times when they want to have it delivered. We’re going to keep innovating and executing to get better at all three, as our diversified omni-model positions us well to gain share in high-growth markets around the world.”

As of July 31, Walmart had 10,524 stores worldwide, including 4,740 Walmart and 599 Sam’s Club stores in the United States and 5,185 international locations.