Walmart’s Stock Surges Into Record Territory After a Grand-Slam Earnings Report

Walmart Inc. shares surged to record highs on Thursday following the company's impressive fiscal first-quarter earnings report, largely driven by a substantial increase in e-commerce sales. Walmart exceeded Wall Street expectations in terms of profit, revenue, and same-store sales, prompting an upward revision of its full-year earnings outlook.

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The growth in sales was attributed to higher transaction volumes, increased foot traffic in stores, and gains in market share. CEO Doug McMillon, during a post-earnings call with analysts, emphasized that these results were not primarily inflation-driven. According to an AlphaSense transcript, he noted that overall prices had risen by about 0.4 percentage points from the previous year, which is half the rate of the previous year's increase.

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Interestingly, McMillon highlighted that general merchandise prices experienced "deflation" in the mid-single digit percentage range, while prices for food and consumables increased in the low-single digit range. CFO John Rainey explained that the lower prices for general merchandise are reflective of the current financial strain on many consumers, who are prioritizing essential items over discretionary spending.

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Walmart's stock, symbolized as WMT, jumped 5.8% in morning trading, making it the top performer in the S&P 500 index. It was on track to close well above its previous record of $61.45 set on March 21 and appeared headed for its largest one-day gain since November 15, 2022, when it rose 6.5%.

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For the quarter ending April 30, Walmart's net income soared to $5.1 billion, or 63 cents per share, compared to $1.67 billion, or 21 cents per share, in the same period the previous year. Adjusted earnings per share, excluding nonrecurring items, were 60 cents, beating the FactSet consensus of 53 cents. Revenue increased by 6% to $161.51 billion, surpassing the FactSet consensus of $159.57 billion.

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In the U.S., Walmart's sales grew by 4.6% to $108.7 billion, exceeding the FactSet consensus of $107.94 billion. This growth was driven by a 3.8% increase in transactions, while the average ticket remained flat. CFO John Rainey pointed out that Walmart is seeing increased engagement across all income levels, with upper-income households contributing significantly to market share gains.

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A significant contributor to the U.S. sales boost was the launch of a new private food brand, Bettergoods, which Rainey described as the largest food private brand release in 20 years. Notably, 70% of Bettergoods items are priced under $5.

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Sam’s Club also performed well, with sales rising 4.6% to $21.4 billion, exceeding expectations of $21.27 billion. This was due to a 5.4% increase in transactions, despite a 1% decline in the average ticket. International sales jumped 12.1% to $29.8 billion, outpacing forecasts of $28.80 billion.

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Global e-commerce sales saw a 21% rise, led by a 22% increase for Walmart U.S., driven by store-fulfilled pickup and delivery services. The cost of sales grew by 5.1% to $131.83 billion, less than the revenue increase, leading to a 0.42 percentage point improvement in consolidated gross margin.

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Same-store sales for Walmart U.S. rose by 3.8%, surpassing the FactSet consensus of a 3.5% increase, while Sam’s Club saw a 4.4% rise, beating the expected 3.5% increase.

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When questioned about Walmart’s customer demographics, CFO Rainey explained that their customer base is evenly distributed across three income groups: below $50,000, $50,000 to $100,000, and above $100,000 annually. This diverse customer base indicates that Walmart is appealing to a wide range of income levels.

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Looking ahead, Walmart expects second-quarter adjusted EPS to be between 62 and 65 cents, compared to the FactSet consensus of 64 cents. For fiscal 2025, Walmart anticipates full-year EPS to be at the high end or slightly above its original guidance of $2.23 to $2.37, aligning with the current FactSet EPS consensus of $2.37. Net sales are also expected to reach the high end or exceed the previous growth guidance of 3% to 4%.

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CEO McMillon also commented on recent organizational changes, including the reduction of remote work and some home-office roles, emphasizing the importance of in-person collaboration for the company’s culture and decision-making processes.

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Year to date, Walmart's stock has rallied 20.5%, outperforming the Consumer Staples Select Sector SPDR ETF's 8.8% gain and the Dow Jones Industrial Average's 6.2% increase.

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