Wal-Mart Q2 Earnings Preview : E-Commerce In Focus

Wal-Mart (NYSE:WMT) is scheduled to announce its fiscal second quarter results on Thursday, August 17. The company reported mixed fiscal first quarter results, as its bottom line beat analyst expectations but revenue missed. On a reported basis, the company’s revenue increased 1.4% year over year (y-o-y) to $117.5 billion, driven by growth in the domestic market due to its marketplace offerings, partially offset by foreign currency fluctuations. The retailer’s consolidated net income declined marginally to $3 billion in the first quarter. Wal-Mart also posted earnings per share of $1.00, up 2% y-o-y, which was near the upper end of its guidance range.

Wal-Mart’s e-commerce sales grew an impressive 63% y-o-y, a significant improvement from 29% in the fourth quarter of fiscal 2017. The majority of this growth was organic through Walmart.com, and was likely boosted by the company’s two-day delivery initiative.

Developments In The Quarter

In June, Wal-Mart reached a deal to acquire Bonobos for $310 million in cash. Bonobos initially started by selling pants to men and swiftly expanded its collection to shorts and shirts. This deal could mark a major step for Wal-Mart – as the company largely focuses on low prices, with a fairly price-conscious customer base, whereas Bonobos is viewed as more of an upscale fashion business, which has not been Wal-Mart’s strong suit historically. However, the deal fits with the company’s ongoing digital innovation strategy, which should provide the company with a diverse product portfolio, along with increased digital marketing expertise, eventually helping it face growing competition from internet retailers such as Amazon (NASDAQ:AMZN). For Wal-Mart, the price tag is affordable, considering the company’s $6.5 billion in cash and equivalents as of April 2017, in addition to its competence in inventory management.

Additionally, Wal-Mart rolled out a new pickup discount on online items that aren’t sold in stores, which would lower the prices on items if customers choose to pick up their orders at a local store instead of opting for shipping. This offer could help the company cut down on shipping costs, and consequently pass on the savings to customers. The company covers more than 50 million SKUs to date, from a marketplace perspective.

Q2 Guidance

For the upcoming quarter, Wal-Mart expects comparable sales growth for Wal-Mart U.S. to range between 1.5% to 2.0%, and Sam’s Club (ex. fuel) comparable sales to range between 1.0% to 1.5%. Additionally, the company also expects earnings per share in the range of $1.00 to $1.08 in the second quarter.

Please refer to our complete analysis for Wal-Mart  

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