Walmart’s Quarterly Sales Surprise As Lockdown Drives Online, Store Delivery Traffic

Walmart Inc. (WMT) posted better-than-expected revenue and earnings in the first quarter as consumers piled up on food and groceries during the coronavirus pandemic.

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Sales in the first quarter ended April 30 increased 8.6% to $134.6 billion year-on-year, beating analysts’ estimates by about $3.7 billion. Walmart U.S. e-commerce sales surged 74% with strong results for grocery pickup and delivery services, the company said. Operating income rose 5.6% to $5.22 billion with adjusted earnings per share up 4.4% at $1.18, and above analysts’ expectations of $1.12.

“As a result of the health crisis and related stay-at-home mandates, customers consolidated store shopping trips with larger average baskets and shifted more purchases to e-commerce,” Walmart said.

At the same time though, Walmart withdrew its financial guidance for the full-year due to the uncertainty of the duration of the coronavirus pandemic.

“The decision to withdraw guidance reflects significant uncertainty around several key external variables and their potential impact on our business and the global economy, including: the duration and intensity of the COVID19 health crisis globally, the length and impact of stay-at-home orders, the scale and duration of economic stimulus, employment trends and consumer confidence,” said Brett Biggs, Walmart’s chief financial officer. “Our business fundamentals are strong, and our financial position is excellent. While the short-term environment will be challenging, we’re positioned well for long-term success in an increasingly omni world.”

Walmart shares gained as much as 3% at the opening of financial markets and was up 0.7% to $128.37 in later morning trading. The stock has appreciated about 8% so far this year.

Five-star analyst Rupesh Parikh at Oppenheimer assigned a Buy rating on the stock with a $145 price target, saying that Walmart remained among his 3 top food and grocery retailer picks next to Costco and Dollar General.

“Broad-based momentum in all categories including general merchandise represented a positive surprise,” Parikh wrote in a note to investors. “A better than feared bottom line delivery related to incremental COVID expenses should be well-received by investors.”

The rest of Wall Street analysts is also upbeat about Walmart’s stock as the majority of 13 out 16 have a Buy rating, while the remainder is on the sidelines with a Hold rating adding up to a Strong Buy consensus. The $134.08 average price target indicates little room of 4.3% upside potential in the shares in the coming 12 months. (See Walmart stock analysis on TipRanks).