[WMT] Summary of Walmart 2023 1Q Earnings Call Transcript

WMT participants

Steph Wissink - Senior Vice President, Investor Relations
Doug McMillon - President and CEO, Walmart Inc.
John David Rainey - EVP and CFO, Walmart Inc.
John Furner - President and CEO, Walmart U.S.
Judith McKenna - President and CEO, Walmart International
Kathryn McLay - President and CEO, Sam's Club

Business Highlights

1. Revenue Growth:

Walmart Inc. reported a strong first quarter with sales growth globally, including a growth of 26% in e-commerce. The company's international segment had a great quarter, continuing its momentum from last year. Sales grew 12.9% in constant currency, and profit grew even faster at 41%. In the U.S., both Walmart and Sam's Club performed well with good transaction growth, positive units in food, and strong e-commerce growth. Walmart continues to gain market share in the grocery category, including with higher income and younger shoppers, and it saw good growth in membership income in both businesses.

2. Profit Trend:

The company's profit grew much faster than sales, and it made further progress on inventory levels. Walmart's growth was driven by convenience in addition to price, and the company sees it across formats and income and age cohorts. In terms of inventory, Walmart is in good shape, and stock is improving, and excess inventory keeps coming down. The persistently high rates of inflation in dry grocery and consumables are one of the key factors creating uncertainty for Walmart in the back half of the year because of the cumulative impact.

Financial Status:

1. Revenue Growth:

Walmart Inc. reported strong Q1 2023 results, with Walmart U.S. comp sales up 7.4%, driven by higher store traffic trends and strong growth in store fulfilled pickup and delivery. The company saw strong growth in food and health and wellness categories, partially offset by a decline in general merchandise sales due to unseasonably cooler spring weather. Gross margins decreased 41 basis points due to ongoing pressure from category mix shifts, while supply chain costs and transportation were lower. Inflation remained high, up low double-digits in food categories, which continues to pressure discretionary wallets. The company saw share gains in grocery, including from higher income households, and in general merchandise categories where they have invested to improve the customer experience. E-commerce sales were led by continued double-digit growth in store fulfilled pickup and delivery. The international segment delivered an outstanding quarter with strong growth in both sales and profit, led by double-digit growth in China, Walmex, and Flipkart.

2. Profit Trend:

The company's profit trend was not discussed in the transcript. However, the company is focused on driving organic sales growth from its omnichannel business model, diversifying its earnings streams through improved product and business mix, and improving returns by scaling proven high-return investments in its supply chain that drive operating leverage and improve incremental margins. The company raised its full-year guidance to reflect Q1 performance and its expectations for Q2, with net sales in constant currency expected to grow approximately 3.5%, and operating income and constant currency expected to increase approximately 4% to 4.5%. The company is positioning its business to succeed with an expanding omni ecosystem that allows it to grow its top and bottom line throughout any economic environment.

Overall, Walmart Inc. had a strong quarter with sales growth globally, including a growth of 26% in e-commerce. The company's profit grew much faster than sales, and it made further progress on inventory levels. Walmart continues to gain market share in the grocery category, including with higher income and younger shoppers, and it saw good growth in membership income in both businesses. The company is focused on driving organic sales growth from its omnichannel business model, diversifying its earnings streams through improved product and business mix, and improving returns by scaling proven high-return investments in its supply chain that drive operating leverage and improve incremental margins. The company raised its full-year guidance to reflect Q1 performance and its expectations for Q2, with net sales in constant currency expected to grow approximately 3.5%, and operating income and constant currency expected to increase approximately 4% to 4.5%.

Question and Answer

The Walmart 2023 1Q Earnings Call Transcript revealed that the company had a strong quarter and invested in the future. The company's purpose is to help people save money and live better, and it has seen new shoppers, including higher-income and younger customers, looking for value. Price is important to the Walmart shopper, and the company is pleased with the price gaps in the market. The company has built room for adjustments into its plan for the rest of the year, should the consumer or macro environment change. The company is investing in capital investments, such as supply chain and remodel investments, rather than income statement investments. The company is focusing on being a good merchant and impacting mix to drive its business beyond considering income statement investments. The company's Q2 outlook is down 2% due to insurance proceeds received last year, and mix will continue to be an issue. The company expects to see a more pronounced impact from some of the initiatives discussed at its Investor Day in the back half of the year. The company has seen a 360 basis point mix shift between food and general merchandise, and this is expected to continue throughout the year. The company's guidance assumes a cautious outlook on consumer behavior. The company is seeing an uptick in health and wellness products, which come at a lower margin. The company's e-commerce business grew 27% in the first quarter, driven by growth in pickup and delivery and marketplace sellers. The company is building out a global marketplace capability and has launched Walmart fulfillment services in a number of its markets. The company is seeing strength in China, which was one of the important drivers of the quarter performance for International. The company is excited about the build-out of an ecosystem in India between its tech capabilities, sourcing capabilities, Flipkart, and PhonePe. The company is focused on driving unit volume, improving mix, and freeing up cash for customers to use for discretionary goods.The Walmart 2023 1Q Earnings Call Transcript revealed that the company's revenue growth was impacted by higher prices and consumer behavior on purchasing as it relates to units. The International segment saw a 6-6.5% inflation-adjusted increase, while Sam's in the U.S. was flat. The company is excited about the results of its store remodeling program, which has seen a couple of percentage points in terms of uplift of sales. The company has done a couple of dozen stores, and several hundred more are in construction and on the way this year. The company's e-commerce acceleration during the quarter was strong, with food and consumables being the strongest categories. The company's advertising business has seen considerable momentum, with the Flipkart growth at about 50% year-on-year and Walmex at about 64% year-on-year. The company is focused on ensuring that its stores are in stock each day, and it feels better about the supply chain versus a year ago. The company is paying attention to taking markdowns on time and is pulling some markdowns forward within the quarter to take advantage of the traffic that it will see over the Memorial Day holiday. The company's revenue growth was impacted by higher prices and consumer behavior on purchasing as it relates to units. The company's profit trend was not discussed in the transcript.The Walmart 2023 1Q Earnings Call Transcript revealed the company's performance data and future growth plans. The company's revenue growth was driven by strong e-commerce growth, with a 26% increase in online sales. The company's profit trend was focused on managing inflation and protecting profits through alternative investments, mix management, and private brand share. The company's main interests were in maintaining a strong value proposition for customers, retaining higher-income shoppers, and managing shrink. The company's future growth plans included expanding SKU count and seller count in the marketplace, investing in fulfillment services and advertising, and being disciplined with capital. Overall, Walmart Inc. is positioned to outperform and continue to grow through its strong and capable team, ability to adapt to changing environments, and focus on customer needs.