BENTONVILLE, Ark., July 25, 2022 — Walmart Inc. (NYSE: WMT ) today provided a business update and revised its earnings outlook for the second quarter and full year, primarily due to pricing measures aimed at improving inventory levels at Walmart. and Sam’s Club in the US and sales mix.
Walmart US offset sales, excluding fuel, are expected to be around 6% for the second quarter. This is higher than previously expected with a heavier mix of food and consumables, which is negatively impacting the gross margin rate. Food inflation is in double digits and higher than at the end of the first quarter. This affects customers’ ability to spend on general merchandise categories and requires more markdowns to move through inventory, especially apparel. During the quarter, the company made progress reducing inventory, managing pricing to reflect certain supply chain costs and inflation, and reducing storage costs associated with a container backlog. Customers are choosing Walmart to save money during this inflationary period, and that’s reflected in the grocery company’s continued market share gains.
“Rising levels of food and fuel inflation are affecting the way customers spend, and while we’ve made great strides in eliminating tough categories, apparel at Walmart USA requires more markdown dollars. Now we are anticipating more pressure on general merchandise in the back half, however, we are encouraged by the start we are seeing in school supplies at Walmart US,” said Doug McMillon, president and CEO of Walmart Inc.
In light of the current environment and the company’s outlook for the rest of the year, it offers the following updates to its guidance.
Consolidated net sales growth for the second quarter and full year is expected to be 7.5% and 4.5%, respectively. Excluding divestitures1, full-year consolidated net sales growth is expected to be around 5.5%. Net sales include a currency headwind of about $1 billion in the second quarter. Based on current exchange rates, the company expects a $1.8 billion headwind in the second half of the year. The company maintains its expectations for growth in Walmart’s U.S. offset sales, excluding fuel, of about 3% in the back half of the year. Operating income for the second quarter and the full year2,3 is expected to decrease between 13 and 14% and 11-13%, respectively. Excluding divestitures1, full-year operating income2 is expected to decline 10-12%. Adjusted earnings per share4 for the second quarter and full year are expected to decline between 8% and 9% and between 11% and 13%, respectively. Excluding divestitures1, full-year adjusted earnings per share4 are expected to decline by 10-12%.
The company’s updated guidance includes the effects of the following discrete items during the second quarter:
Proceeds from an insurance settlement for Walmart Chile, positively impacting operating income by $173 million and adjusted earnings per share by $0.05. Income from a special dividend received by the company related to its equity investment in JD.com, which positively affects other earnings and losses. by $182 million and adjusted earnings per share by $0.05. The company will provide more details on business performance and its outlook for the year when it reports second-quarter results on August 16, 2022.
Walmart Inc. (NYSE: WMT) helps people around the world save money and live better, anytime, anywhere, in retail stores, online and through their mobile devices. Each week, approximately 230 million customers and members visit more than 10,500 stores and numerous e-commerce websites under 46 banners in 24 countries. With fiscal year 2022 revenue of $573 billion, Walmart employs approximately 2.3 million associates worldwide. Walmart continues to be a leader in sustainability, corporate philanthropy and job opportunities. Additional information about Walmart can be found by visiting corporate.walmart.comon Facebook at facebook.com/walmart and on Twitter at twitter.com/walmart.
1The company completed the sale of its UK and Japan operations in the first quarter of fiscal 2022.
2 Growth rates reflect an adjusted basis of prior year results, which excludes business restructuring charges in the fourth quarter of fiscal year 2022.
3 Based on current conversion rates, operating income includes estimated negative impacts of approximately $60 million and $100 million for the second quarter and fiscal year 2023, respectively.
4 Growth rates reflect an adjusted basis for prior year results, which exclude gains and losses on the Company’s equity investments, business restructuring expenses, debt extinguishment losses recorded during the third quarter of fiscal year 2022 and the incremental loss on the sale of the company’s operations. in the United Kingdom and Japan recorded in the first quarter of fiscal year 2022.
This press release contains statements about Walmart management’s forecasts and guidance for or for the performance of consolidated net sales, the performance of comparable sales for its Walmart US segment, the performance of consolidated operating income, adjusted earnings per share and the impacts of foreign currency exchange rates, in each case, for the three-month period ending July 31, 2022 and the full fiscal year ending January 31, 2023. Walmart believes these statements are may be considered “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Act”) and are intended to enjoy the protection of the safe harbor for the statements prospective provided by the Act, as well as the protections provided by other federal securities laws. The assumptions on which these forward-looking statements are based are also forward-looking statements. These forward-looking statements are not statements of historical fact, but express our estimates or expectations for our consolidated financial performance, or one of our segments or businesses, or results of operations for future periods or as of dates or events or future developments. that may occur in the future or discuss our plans, goals or objectives.
Our actual results may differ materially from those expressed or implied in any of these forward-looking statements as a result of changes in circumstances, assumptions not being met or other risks, uncertainties and factors, including: the impact of the pandemic of COVID-19 in our business and the global economy; economy, capital markets and business conditions; trends and events around the world and in the markets in which we operate; currency exchange rate fluctuations, changes in market interest rates and market wage levels; changes in the size of various markets, including e-commerce markets; unemployment levels; inflation or deflation, in general and in particular product categories; consumer confidence, disposable income, credit availability, spending levels, purchasing patterns, debt levels and demand for certain commodities; the effectiveness of the implementation and operation of our strategies, plans, programs and initiatives; unexpected changes in our goals and plans; the impact of acquisitions, investments, divestitures and other strategic decisions; our ability to successfully integrate acquired companies; changes in the trading prices of certain equity investments we hold; competitor initiatives, entry and expansion of competitors in our markets and competitive pressures; average customer traffic and transactions in our stores and clubs and on our e-commerce websites; the mix of goods we sell, the cost of goods we sell and the shrinkage we experience; our gross profit margins; the financial performance of Walmart and each of its segments, including our cash flow amounts for various periods; the amount of our net sales and operating expenses denominated in U.S. dollars and various foreign currencies; the prices of raw materials and the price of gasoline and diesel; supply chain disruptions and disruptions in seasonal purchasing patterns; the availability of goods from suppliers and the cost of goods purchased from suppliers; our ability to respond to changing trends in consumer purchasing habits; consumer acceptance and response to our stores, clubs, e-commerce platforms, programs, merchandise offerings and delivery methods; cyber security events affecting us and related costs and business impact; developments, results and costs incurred in legal or regulatory proceedings to which we are a party or are subject, and the liabilities, obligations and expenses, if any, that we may incur in connection therewith; claims and accident costs and insurance costs; our workforce turnover and labor costs, including health and other benefit costs; our effective tax rate and factors affecting our effective tax rate, including valuations of certain tax contingencies, valuation allowances, changes in law, administrative audit results, impact of discrete items and the mix of earnings between Walmart’s international and US operations; changes in applicable tax, labor and other laws and regulations and changes in tax rates, including the enactment of laws and the adoption and interpretation of administrative rules and regulations; the imposition of new import taxes, new tariffs and changes in existing tariffs; the imposition of new trade restrictions and changes to existing trade restrictions; adoption or creation of new and changed government policies, programs, initiatives and actions in the markets in which Walmart operates and elsewhere and actions with respect to such policies, programs and initiatives; changes in accounting estimates or judgments; the level of public aid payments; natural disasters, climate changes, geopolitical events, global health epidemics or pandemics and catastrophic events; and changes in generally accepted accounting principles in the United States.
Our most recent Annual Report on Form 10-K and subsequent Quarterly Report on Form 10-Q filed with the SEC discuss other risks and factors that could cause actual results to differ materially from those expressed or implied by any forward-looking statements of the statement and comments related to management. You are urged to carefully consider all risks, uncertainties and factors identified above or discussed in these reports when evaluating the forward-looking statements in this release. Walmart cannot assure you that the results reflected or implied in any forward-looking statement will be realized or, even if substantially realized, that such results will have the intended or expected consequences and effects for or on our operations or financial performance. Forward-looking statements made today are as of the date of this release. Walmart undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances.