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08/16/2022

Inflation boosts Walmart’s Q2 revenue

Walmart’s total revenue in Q2 was $152.9 billion, an increase of 8.4%, or 9.1% in constant currency.
Sandra Levy
Senior Editor
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Walmart delivered strong top-line growth globally in the second quarter, partially driven by inflation.

The retailerrevenue and profit rose in the second quarter as the company benefitted from more consumer trips to its stores.

The retailers total revenue was $152.9 billion, an increase of 8.4%, or 9.1% in constant currency.

[Read more: Pharmacy Innovator of the Year 2021: Walmart connects with communities]

“We’re pleased to see more customers choosing Walmart during this inflationary period, and we’re working hard to support them as they prioritize their spending,” said Doug McMillon, president and CEO of Walmart. The actions we’ve taken to improve inventory levels in the United States, along with a heavier mix of sales in grocery put pressure on profit margin for Q2 and our outlook for the year.”

“We made good progress throughout the quarter operationally to improve costs in our supply chain, and that work is ongoing,” McMillon said. “We continue to build on our strategy to expand our digital businesses, including the continued strength we see in our international markets.”

Walmart reported that U.S. comp sales grew 6.5% and 11.7% on a two-year stack. The retailer also shared that e-commerce growth was 12% and 18% on a two-year stack.

[Read more: Walmart acquires Volt Systems]

Walmart continued to gain market share in grocery. Sam’s Club comp sales increased 9.5%, and 17.2% on a two-year stack. Membership income increased 8.9% with member count at an all-time high.

Walmart International net sales were $24.4 billion, an increase of $1.3 billion, or 5.7%. The increase was negatively affected by $1 billion from currency fluctuations, the company said.

The company reported double-digit comps in the three largest markets of Mexico, Canada and China. Its global advertising business grew nearly 30%, led by Walmart Connect in the United States and Flipkart advertising.

[Read more: Walmart's CFO to depart]

The retailers consolidated gross profit rate declined 132 basis points, primarily due to markdowns and a mix of sales in the United States, and an inflation-related LIFO charge at Sam’s Club. Consolidated operating expenses as a percentage of net sales decreased 45 basis points, primarily due to strong sales growth, partially offset by wage investments. Consolidated operating income was $6.9 billion, a decrease of 6.8%, positively affected by $173 million from an insurance settlement for Walmart Chile.

Walmart reported GAAP EPS of $1.88, and adjusted EPS of $1.77.

GAAP and adjusted EPS include a 5 cent impact from the Walmart Chile insurance settlement, as well as a 5 cent impact from a dividend related to the company’s equity investment in JD.com. Comp sales for the 13-week period ended July 29, 2022 compared to the 13-week period ended July 30, 2021, and excludes fuel, the company noted.

[Read more: Walmart to launch refurbished products program]

Walmart is updating its guidance for the fiscal year to reflect second-quarter performance and maintains its outlook for the back-half of the year. Consolidated net sales growth is expected to be about 4.5%. Excluding divestitures, consolidated net sales growth is expected to be about 5.5%.

Based on current exchange rates, the company expects a headwind of about $2.1 billion in the second half of the year.

Walmart said that it maintains its expectations for Walmart U.S. comp sales growth, excluding fuel, of about 3% in the second half of the year. For the full year, the company expects Walmart U.S. comp sales growth, excluding fuel, of about 4%. 

[Read more: Walmart raises full year earnings amid positive Q3 results]

Consolidated adjusted operating income is expected to decline 9% to 11%, which improved from the company’s prior guidance of a decline of 11% to 13% and reflects better performance in the second quarter. Excluding divestitures, consolidated adjusted operating income is expected to decline 8% to 10%.

Adjusted earnings per share are expected to decline 9% to 11%. Excluding divestitures, adjusted earnings per share is expected to decline 8% to 10%.

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