Walmart CFO on Q3 earnings: ‘our value proposition is resonating with consumers’

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Shares of Walmart Inc (NYSE: WMT) are up roughy 7.0% on Tuesday after the retail behemoth reported better-than-expected results for its fiscal third quarter and raised its future guidance.

Highlights from CFO’s interview with Yahoo Finance

Walmart stock is gaining also because the big box retailer announced a $20 billion share repurchase programme. Discussing that with Yahoo Finance, CFO John David Rainey said:

One of the great things about Walmart is the amount of free cash flow we generate. We’ve been very balanced in allocating capital to dividend, buying back shares, and investing in growth. We’ll continue to be balanced going forward.

Walmart refrained from disclosing the time frame in which it plans on executing the announced buyback.

According to Walmart Inc, the opioid litigation was also settled for $3.0 billion this quarter, which releases it from an ongoing overhang. The multinational ended its third quarter with inventory still up 12.6% versus last year but lowered “significantly” on a quarter-over-quarter basis.

70% of [higher inventory] is related to inflation. A quarter, two quarters ago, it was stuck up in supply chain. It was in ports. We’ve been able to get that inventory our stores, which is important because that allows us to sell it.

In Q2, its inventory was up nearly 26% when compared to the same quarter last year.

The finance chief confirmed that Walmart is committed to further fixing inventories over the holiday season with promotions in the more challenged categories like home electronics and apparel.

Walmart Q3 financial highlights

Swung to $1.80 billion of net loss or 66 cents per shareThat compared to $3.11 billion of net income last yearAdjusted for one-time items, EPS came in at $1.50 a shareWalmart U.S. sales were up 8.5%, Sam’s Club up 12.8%Overall Revenue jumped 8.7% year-on-year to $152.81 billionConsensus was $1.32 of adjusted EPS on $147.67 billion revenue

According to the press release, Walmart had its advertising business grow 30% this quarter. Commenting on that, CFO Rainey said:

Advertising has a much higher margin that our retail business. So, we’re excited to grow and add to our platform. We’re not seeing much of a decline in advertising because of the relevance we have with consumers. Walmart is the place advertisers should be wanting to advertise as consumers are coming to our store and we’re gaining share.

Other notable figures in the earnings report

International sales went up 7.1% this quarter including the impact of currency headwinds. Walmart reported a 100-bps hit to gross margin as cost of sales climbed 10.1% in the third quarter.

Interestingly, the finance chief confirmed that Walmart is hiring at a time when the likes of Meta and Amazon are significantly lowering their headcounts.

Walmart is hiring. We’re adding associates over the holiday period to meet demand. But we’ve made our mark by being efficient and very disciplined with headcount and cost in general. We’ll continue to do that.

Walmart’s future guidance

For the full financial year, Walmart now forecasts a 6.0% to 7.0% decline in adjusted per-share earnings versus up to a 10% decline it had guided for earlier. It also lifted its outlook for sales growth to 5.5% from its previous estimate of 4.5%.

In comparison, analysts were at a 9.1% decline for adjusted EPS and a 5.1% increase in net sales. CFO Rainey added:

In the face of a pretty challenging macro environment, Walmart’s value proposition is resonating with consumers. We’re growing while investing in the flywheels of our business like advertising and market fulfilment.

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