Walmart tops sales expectations led by e-commerce, higher average ticket, and strength in the advertising business

[Walmart Quarterly Revenue Surges 8.6 Percent During COVID-19 Pandemic]
Scott Olson/Getty Images News

Walmart (NYSE:WMT [https://seekingalpha.com/symbol/WMT]) traded lower in early action on Thursday as investors assessed the retail giant's second quarter earnings report.

Comparable sales in the U.S. rose 4.6% to top the consensus estimate of 4.1%. Transactions were 1.5% higher during the quarter, and the average ticket was 3.1% higher compared to a year ago. E-commerce sales rose 26% during the quarter and contributed 350 basis points to comparable sales.

Comparable sales were 5.9% higher for the Sam's Club chain to top the consensus expectation. Sam's Club saw strength in the grocery and health & wellness categories, as well as continued growth in general merchandise sales.

International sales for the retail giant rose 5.5% year-over-year to $31.2 billion, led by continued strength in the food & consumables and general merchandise categories.

Notably, Walmart's (NYSE:WMT [https://seekingalpha.com/symbol/WMT]) global advertising business grew approximately 46% during the quarter.

Walmart's (NYSE:WMT [https://seekingalpha.com/symbol/WMT]) operating income decreased 8.2%, affected by discrete legal & restructuring costs. On an adjusted basis operating income was up 0.4% due to strong sales and continued execution on the company's financial framework. EPS came in at $0.68 to miss the consensus mark of $0.74.

Walmart (WMT [https://seekingalpha.com/symbol/WMT]) ended the quarter with a cash position of $9.4 billion and total debt of $0.3 billion, inclusive of short-term borrowings, long-term debt due within one year, finance lease obligations due within one year, long-term debt, and long-term finance lease obligations. Free cash flow was $6.9 billion. Walmart's (WMT [https://seekingalpha.com/symbol/WMT]) inventory level was up 3.8% year-over-year to $57.7 billion.

Looking ahead, Walmart (WMT [https://seekingalpha.com/symbol/WMT]) guided for net sales to grow between 3.75% to 4.75% for the fiscal year, up from its previous expectations of 3% to 4%. Walmart (WMT [https://seekingalpha.com/symbol/WMT]) expects Q3 EPS of $0.58 to $0.60 (midpoint $0.59) vs. $0.57 consensus and full-year EPS of $2.52 to $2.62 (midpoint $2.57) vs. $2.62 consensus. The company mentioned tariffs as a general risk factor.

"The top-line momentum we have in our business comes from how we’re innovating and executing. Connecting with our customers and members through digital experiences is helping to drive our business, and the way we’re deploying AI will make these experiences even better. We’re people-led and tech-powered, and I love how our associates continue to drive change and results for our company," stated CEO Doug McMillon on the results.

Shares of Walmart (WMT [https://seekingalpha.com/symbol/WMT]) fell 2.0% in premarket action on Tuesday. Target (TGT [https://seekingalpha.com/symbol/TGT]), Costco (COST [https://seekingalpha.com/symbol/COST]), Dollar General (DG [https://seekingalpha.com/symbol/DG]), Best Buy (BBY [https://seekingalpha.com/symbol/BBY]), and Dollar Tree (DLTR [https://seekingalpha.com/symbol/DLTR]) all showed small early declines.

MORE ON WALMART

* Walmart Earnings Preview: Tariffs, Trade Policy Have Complicated Picture; Focus On The Operating Margin [https://seekingalpha.com/article/4814888-walmart-earnings-preview-tariffs-trade-policy-complicated-picture-focus-operating-margin]
* Walmart: Tariff Fears Fuel Cry Wolf Rally [https://seekingalpha.com/article/4814856-walmart-tariff-fears-fuel-cry-wolf-rally]
* Walmart: Recent Inflation Data Is A Headwind Ahead Of Q2 Earnings [https://seekingalpha.com/article/4814529-walmart-recent-inflation-data-is-a-headwind-ahead-of-q2-earnings]
* Walmart beats Q2 topline estimates, raises outlook [https://seekingalpha.com/news/4487849-walmart-beats-q2-topline-estimates-raises-outlook]
* How are things going for U.S. retail? Highlights from the C-Suite [https://seekingalpha.com/news/4487836-how-are-things-going-for-u-s-retail-highlights-from-the-c-suite]