On August 15, 2024, Walmart Inc (WMT, Financial) released its 8-K filing for the second quarter of fiscal year 2025, showcasing robust financial performance. The company reported a GAAP EPS of $0.56 and an adjusted EPS of $0.67, surpassing the analyst estimate of $0.64. Revenue for the quarter stood at $169.3 billion, slightly above the estimated $168.57 billion.
Company Overview
Walmart Inc (WMT, Financial) is the leading retailer in the United States, known for its strategy of superior operating efficiency and offering the lowest priced goods to consumers. This approach drives significant store traffic and product turnover. Walmart operates over 4,600 stores in the U.S. (5,200 including Sam's Club) and over 10,000 stores globally. In fiscal 2024, Walmart generated over $440 billion in domestic sales, with Sam's Club contributing another $86 billion. Internationally, Walmart generated $115 billion in sales, serving around 240 million customers globally each week.
Performance and Challenges
Walmart Inc (WMT, Financial) reported a consolidated revenue increase of 4.8% year-over-year, reaching $169.3 billion. The company's operating income grew by 8.5%, with adjusted operating income up by 7.2%. Global eCommerce sales surged by 21%, driven by store-fulfilled pickup and delivery services. However, the company faces challenges such as maintaining its low-price strategy amidst inflationary pressures and managing inventory levels efficiently.
Financial Achievements
Walmart Inc (WMT, Financial) achieved significant milestones in the second quarter. The company's consolidated gross margin rate increased by 43 basis points, led by improvements in Walmart U.S. and Walmart International. The global advertising business grew by 26%, with Walmart Connect in the U.S. seeing a 30% increase. Additionally, the company's return on assets (ROA) was 6.4%, and return on investment (ROI) was 15.1%, up by 230 basis points.
Key Financial Metrics
| Metric | Q2 FY25 | Q2 FY24 | Change |
|---|---|---|---|
| Net Sales | $169.3 billion | $161.5 billion | 4.8% |
| Operating Income | $6.6 billion | $6.1 billion | 8.5% |
| Adjusted EPS | $0.67 | $0.64 | 4.7% |
Income Statement Highlights
Walmart Inc (WMT, Financial) reported a consolidated gross margin rate increase of 43 basis points, driven by higher gross margins and growth in membership income. The company's operating income rose by $0.6 billion, or 8.5%, due to reduced eCommerce losses and improved gross margins. The global inventory decreased by 2.0%, including a 2.6% reduction for Walmart U.S., maintaining healthy in-stock levels.
Balance Sheet and Cash Flow
Walmart Inc (WMT, Financial) reported cash and cash equivalents of $8.8 billion and total debt of $47.0 billion. Operating cash flow was $16.4 billion, a decrease of $1.8 billion, while free cash flow stood at $5.9 billion, a decrease of $3.1 billion. The company repurchased 33.4 million shares year-to-date, amounting to $2.1 billion.
Commentary
"Our team delivered another strong quarter. They work hard every day to help our customers and members save time and money. Each part of our business is growing—store and club sales are up, eCommerce is compounding as we layer on pickup and even faster growth in delivery as our speed improves. Our newer businesses like marketplace, advertising, and membership, are also contributing, diversifying our profits and reinforcing the resilience of our business model." - Doug McMillon, President and CEO, Walmart
Analysis
Walmart Inc (WMT, Financial)'s strong performance in Q2 FY25 highlights its ability to navigate a challenging retail environment. The company's focus on eCommerce and diversified revenue streams, such as advertising and membership income, has bolstered its financial resilience. However, maintaining its low-price strategy amidst inflationary pressures remains a critical challenge. The company's robust financial metrics, including improved gross margins and reduced inventory levels, indicate effective operational management.
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Explore the complete 8-K earnings release (here) from Walmart Inc for further details.
