Walmart to Continue Benefiting from Shopping Season with Proactive Inventory Securing

Accelerated On-Offline Growth
EPS Guidance Raised to $6.4
"Low Concern Over Performance Slowdown Due to Inventory Securing Despite Logistics Crisis"

[Image source=AP Yonhap News]

[Asia Economy Reporter Minji Lee] Walmart's stock price has been sluggish despite solid earnings, due to concerns over supply chain congestion. However, the securities industry predicts that Walmart can continue its earnings improvement trend as it has proactively secured inventory.

According to 21 in the financial investment industry, Walmart's stock price fell about 3% over the past month to $142.39. Despite posting quarterly earnings that exceeded market expectations and raising its annual profit guidance, the stock price did not show an upward trend. It is interpreted that supply chain-related costs burdened the cost of goods, which weighed on the stock price.

In the third quarter, Walmart's total sales and operating profit increased by 4.3% and 0.2% year-on-year, respectively, recording $140.53 billion and $5.792 billion. Sales significantly exceeded the market expectation of $135.27 billion. By segment, Walmart's North America business and Sam's Club sales increased by 0.3% and 19.7% year-on-year, respectively, but overseas business sales contracted by 20%.

Seojeong-yeon, a researcher at Shin Young Securities, said, "Since net store additions in existing businesses are limited, the same-store sales growth rates of the North America business and Sam's Club were similar to the overall growth rate. The decline in overseas business sales is due to the ongoing impact of Walmart Canada's bank sale, which is estimated at about $9.4 billion and weighed on the company's third-quarter sales growth rate."

Online sales for the North America business and Sam's Club increased by 8% and 32%, respectively, maintaining a favorable trend, with Sam's Club membership revenue rising 11%, contributing to stable income generation. Despite cost pressures, Walmart effectively managed expenses. Researcher Seo explained, "Supply chain-related costs such as logistics expenses increased, and the sales proportion of low-margin products rose, causing the gross profit margin to fall by 42 basis points. Although labor costs were a significant burden in selling and administrative expenses, operating profit margin slightly increased due to solid sales growth and reduced COVID-related costs."

Through this earnings announcement, Walmart raised its full-year earnings guidance. It adjusted the same-store sales growth rate for the North America business to 6% and the adjusted earnings per share (EPS) to $6.40, up from the previous range of $6.20 to $6.36. Hanwi, a researcher at NH Investment & Securities, explained, "This reflects recent market share gains in the U.S. grocery market and positive momentum in both online and offline businesses."

While the market is concerned about growth slowdown and cost burdens from the global logistics crisis, considering Walmart's proactive inventory buildup, it is expected to continue solid earnings improvement in the fourth quarter. Attention should rather be paid to the fact that Walmart is consistently achieving strong results online by leveraging its offline stores. Researcher Hanwi advised, "With Walmart's inventory increasing about 11.5% ahead of the fourth-quarter shopping season, concerns about earnings slowdown due to product shortages are limited. It is appropriate to use stock price declines as buying opportunities."

This content was produced with the assistance of AI translation services.