Why Walmart’s Sales Could Grow despite Tough Comparisons

Comparable sales likely to sustain momentum

We expect Walmart’s (WMT) revenues to continue to grow on the back of sustained momentum in comparable sales. The retailer’s comparable sales stayed strong in the past several quarters despite heightened competition in the grocery business. We expect comparable sales in its US business to continue to mark strong growth, driven by an increase in traffic and ticket size.

Walmart’s expansion of digital fulfillment options, wide assortments, and value pricing are expected to drive traffic and ticket size in the US. Meanwhile, its international sales are expected to benefit from the acquisition of Flipkart. Also, the expansion of digital platform and investments in pricing are expected to support comparable sales in the key markets, including Mexico, Central America, Canada, and the UK.

Why Walmart’s Sales Could Grow despite Tough Comparisons

However, Walmart is up against a tough YoY comparison in the second quarter, which could restrict the comparable sales growth. Walmart’s comparable sales in its US business rose 4.5% during the second quarter of the previous fiscal year, it’s highest in a decade.

Consensus estimate and guidance

Analysts expect Walmart’s top line to mark low to mid-single-digit growth in coming quarters driven by improved comparable sales. However, adverse currency fluctuations, a reduction in tobacco sales at some Sam’s Club locations, and scaling back of operations in Brazil are expected to hurt the top-line growth. Moreover, tough comparisons could limit the growth rate.

Management expects its base business to stay strong and projects its revenues to mark 3% growth on a constant neutral basis in fiscal 2020.