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Walmart Reports Mixed Q1 Results, but Its US Comps Impress

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Key takeaways from Walmart’s first-quarter

On May 16, Walmart (WMT) reported mixed fiscal 2019 first-quarter earnings results for the period that ended on April 30. Walmart’s top line fell short of Wall Street’s estimate, reflecting adverse foreign exchange rates and the discontinuation of tobacco sales at some of its Sam’s Club locations. However, improved comparable sales in the domestic market and strong e-commerce sales supported the company’s top line, which improved on a YoY (year-over-year) basis.

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Comparable sales at Walmart’s US business increased 3.4%, which management said was the company’s best first-quarter performance in the past nine years. This increase also marked the fourth consecutive quarter during which comparable sales in its US business increased at a rate of more than 3%. Walmart’s e-commerce sales at its US business rose 37% driven by continued strength in online grocery pickup services and increased sales in the home and fashion categories.

Walmart’s adjusted earnings came in far ahead of analysts’ estimate thanks to higher comparable sales in the US business, lower pressure from transportation costs, and an improvement in its mix. A lower adjusted effective tax rate also supported Walmart’s fiscal 2019 first-quarter bottom line.

Despite its beating Wall Street’s estimate on the EPS front, Walmart’s adjusted EPS fell 0.9%, reflecting pressure in the international market and price investments.

First-quarter financials

Walmart posted net sales of $123.9 billion in the quarter, which increased 1.0% on a YoY basis but fell short of analysts’ estimate of $125.0 billion. Its consolidated gross margin contracted 27 basis points to 24.3%, reflecting price investments and declines in international markets. However, an improved merchandising mix, less pressure from transportation costs, and better e-commerce margins supported its margins.

Walmart posted adjusted EPS of $1.13, a fall of 0.9% on a YoY basis, but it handily exceeded analysts’ estimate of $1.02.

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