In Q1, Walmart Inc. (WMT) wished for customers to come back to its stores. In Q2, this wish came true, helping the retail giant report strong comparable sales.
Here’s a quote from president and CEO Doug McMillon back in May, following the release of Walmart’s first-quarter financial results.
“This was a strong quarter. Every segment performed well, and we’re encouraged by traffic and grocery market share trends. Our optimism is higher than it was at the beginning of the year. In the U.S., customers clearly want to get out and shop.”
“We have a strong position as our store environment improves and e-commerce continues to grow. Stimulus in the U.S. had an impact, and the second half has more uncertainty than a typical year. We anticipate continued pent-up demand throughout 2021.”
Apparently, he was right. Americans returned to Walmart’s stores. Walmart’s U.S. store transactions rose by 6.1% year-over-year in Q2. (See WMT stock charts on TipRanks)
Strong Comps Lead to Strong Performance
Strong same-store sales helped Walmart earn Q2 GAAP earnings per share of $1.52, and the retail giant raised its outlook for the second time in a row. It now expects U.S. same-store sales of 5% to 6% for Fiscal 2022 and e-commerce sales of $75 billion.
“We had another strong quarter in every part of our business,” said McMillon, following the release of Walmart’s second-quarter earnings. “Our global e-commerce sales are on track to reach $75 billion by the end of the year, further strengthening our position as a leader in omnichannel.”
“We grew market share in U.S. grocery, added thousands of new sellers to our marketplace, rapidly grew advertising businesses around the world, and we’re finding innovative ways to commercialize our data and build technology.”
Valuation Concerns Are Looming
Wall Street liked what it saw, but the response was muted. That’s because Walmart’s report coincided with the release of the U.S. Census Bureau’s retail sales report, which indicated a big decline in what Americans spent in stores in July.
According to TipRanks, analysts are moderately bullish on Walmart’s stock. The 21 Wall Street analysts following the stock have given 18 Buy ratings, and 3 Hold ratings over the past three months.
The average WMT price target is $172.60 and implies almost 15% upside potential, with a high forecast of $190 and a low forecast of $156.
Summary and Conclusions
Customers returned to Walmart’s stores in Q2, helping the retail giant boost its top and bottom lines. That’s a wish come true for the big brick-and-mortar retailer.
The stores are where its advantage lies in fighting off Amazon, which has little brick-and-mortar presence.
Disclosure: On the date of publication, Panos Mourdoukoutas held shares of Walmart stock.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
