Walmart The Value King in a Value Economy: Great Q2 Earnings and Raised Guidance
Retail analysts are suddenly feeling bullish after literally a week ago feeling bearish: "My kingdom for a one-handed economist!!!"
Overall:
* WMT growing with all age and income groups. Most of growth is coming from higher income brackets.
* Walmart's North Star values include: value, assortment, experience and trust.
* Growth is being driven by higher transaction counts/unit growth.
* Inflation is flat, down in some areas.
* Global eCom growth up 21%; intl only up 18%
US Overall:
* Comp store sales growth 4.2%; eCom up 22%; Weekly active customers up 20%
* Strong traffic/unit growth
* Still a discerning/choiceful consumer
US eCommerce:
* 40% reduction in delivery cost per order
* eCom without services is the biggest contribution to operating income growth. Then you add advertising, membership, fulfillment.
* Walmart Connect US Ads up 30%
Marketplace:
* 30% growth in each of the last 4 quarters -- this quarter = 32%
* Increased seller counts by double-digit %
* Many categories grew 20%+: fashion, toys, hardlines, home
Categories:
* General merchandise flattened to breakeven, a positive sign first time in a while.
* Food and consumables a strength.
* health/wellness up big based on strength of GLP1, supplements also up based on back to school.
* See marketplace details above.
Supply Chain:
* WFS surpassed 40% marketplace penetration
* Biggest contribution to additional capex.
* 45% ecom FC volume automated. 800 stores receiving semi-automated freight from 15 RDCs.
1H Results so far:
* Sales growth at 5% and Op Income growth almost 10%.
* We see more of the same.
FY Guidance Raising:
* Sales growth of 3.75 - 4.75% (up from 3-4%)
* Op Income growth of 6.5 - 8%, up from 4-6% (always felt conservative -
This was the 🎤 moment.)
* Sustained improvements in incremental margin.
* Sees eCommerce getting profitable in the next 2 years.
* Not worried about elections and uncertainty. In good or bad economy, WMT works fine.
Tidbits:
* inventory down 2% y/y
* WMT Data Ventures client base increased 200%
* US Walmart+ income grew double-digits.
All in all, Walmart continues to plow ahead. Leaving others in its wake.
The value king in a value economy.
