Walmart Stores Inc. (NYSE:WMT), the biggest name in retail, is surging on Thursday after reporting quarterly earnings and sales that were higher than expected. The all-important same-store sales category also outpaced expectations, which allowed the company to boost its guidance for fiscal 2020.
Q2 Earnings Summary
- Revenue: $130.4 billion
- Adjusted earnings: $1.27 per share
- Same-store sales growth: 2.8%
Walmart impressed on both the top and bottom lines Thursday, helping the stock to healthy gains through the morning session. The global retail giant earned an adjusted $1.27 per share in the second quarter on revenues of $130.4 billion. Analysts in a median estimate called for $1.22 in earnings on revenues of $130.08 billion.
Same-store sales climbed 2.8% during the quarter, which was also higher than expected. Sam’s Club, a chain that is owned and operated by Walmart, saw same-store sales rise 1.2%.
As CNBC noted, Walmart’s U.S. operations have seen 20 consecutive quarters of sales growth.
Walmart’s financials were released a day after Macy’s (NYSE:M) reported dismal second-quarter results, which highlighted the ongoing struggles of American retail. Traditional retailers are not only being undermined by online shopping, but by weakness in consumer spending. Walmart is responding to this shift by investing heavily in its e-commerce segment.
E-commerce sales jumped 37% in the second quarter. The company is forecasting growth of 35% for this segment in fiscal 2020.
Fiscal 2020 earnings are also expected to be slightly higher than previously believed. Same-store sales are now forecast to reach the upper end of a prior range of 2.5% to 3%.
WMT Stock Surges
Walmart’s stock opened sharply higher on Thursday, eventually climbing 7% through the morning session. WMT peaked at $113.64, which wasn’t far off last month’s record high.
At current values, WMT has a total market capitalization of $316.3 billion. The stock is up nearly 20% year-to-date, which is higher than the S&P 500 Index and the consumer discretionary segment.
WMT stock has further room to grow thanks to solid numbers across several key components, including same-store sales, online sales, and fresh food. The company is also a dividend king, having grown its payouts in each of the last 44 years. These factors are likely to make WMT an attractive bet, even at current prices.
Conclusion
The erosion of American retail is expected to continue for the foreseeable future, but industry consolidation seems to favour Walmart. Strategic investments in e-commerce and introduction of faster shipping options have allowed Walmart to stay ahead of the curve.
Disclaimer: Author holds no investment position in Walmart at the time of writing.
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