Shares of WalMart (WMT) are cratering hard. In fact, the stock has dropped 10 points at the time of this writing to $95. In this column we discuss the reasons for the strong selloff and what we think you should do now.
Why the selloff?
This selloff comes after the just reporting earnings showed sales which were strong, but full year guidance from the company was subpar. This has investors rushing for the exits. Let us discuss what we are seeing here.
Let us get right into the numbers. GAAP EPS was $0.73 and adjusted EPS was $1.33, missing consensus estimates by $0.04 Total revenue was $136.3 billion, an increase of $5.3 billion, or 4.1%. Excluding currency, total revenue was $135.1 billion, an increase of $4.1 billion, or 3.1%. This surpassed expectations by $1.3 billion.
We were however pleased with comparable sales. Walmart U.S. comp sales increased 2.6%, and comp traffic increased 1.6%. On a two-year stack, comp sales growth of 4.4% marked the best performance in eight years. We should also add that online sales and GMV at Walmart U.S. increased 23% and 24%, respectively.
Sam’s Club sales were also strong. Sam’s comp sales, excluding fuel, increased 2.4% led by comp traffic growth of 4.3%.
Finally, on the international side of things, strength continues.Net sales at Walmart International were $33.1 billion, an increase of 6.7%. Excluding currency, net sales were $31.9 billion, an increase of 2.8%. Nine of eleven markets posted positive comp sales, including our four largest markets.
Consolidated operating income was $4.5 billion, a decrease of 28%. Excluding the impact of discrete charges detailed in this press release, operating income would have decreased less than 1.0 percent.
For the year 2018
It was as great year for the company. Total revenue was $500.3 billion, an increase of $14.5 billion, or 3.0%. Excluding currency, total revenue was $500.9 billion, an increase of $15.1 billion, or 3.1%. As for online sales, Amazon (AMZN) should take note that online sales and GMV at Walmart U.S. increased 44% and 47%, respectively.
Turning to income, operating income was $20.4 billion, a decrease of 10.2%. Excluding the impact of discrete charges detailed in this press release, operating income would have been relatively flat. This was one weakness. That said, the company generated $28.3 billion in operating cash flow and returned $14.4 billion to shareholders through dividends and share repurchases.
The retailer expects full-year EPS of $4.75 to $5.00 vs. $5.13 consensus. Comparable sales are seen rising 2% in the U.S. this year, and that missed consensus of 2.25-2.75%.
What to do
Do you believe in the retailer? Do you like dividends? Let the selloff happen. Welcome it. Shares are down 14% from their all time highs. If you can get shares under $90, that would be a massive opportunity. Sure, there are bumps in the road, but Walmart has delivered consistent growth. Stick by the name.
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