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Walmart’s fiscal Q1 results come in very light

Unexpected cost spikes send EPS below estimates, operating income way down

Walmart's costs surged in the first quarter. (Photo: Jim Allen/FreightWaves)

Wall Street doesn’t like surprises, especially when they come from a company that doesn’t typically deliver them. Walmart Inc. (NYSE: WMT) posted first-quarter fiscal 2023 results Tuesday that even its top executives didn’t anticipate.

Supply chain bottlenecks, higher fuel and labor costs, and a general surge in inflationary pressures all contributed to the Bentonville, Arkansas-based retailer reporting diluted earnings per share of 74 cents, a 23.7% year-on-year decline and a material drop from analysts’ $1.48-per-share consensus estimates. 

The quarter had some outside noise, namely a 56-cents-per-share hit related to valuation declines in equity investments. Excluding that, however, earnings per share of $1.30 was still well short of what analysts and the company had expected.

Shares were clobbered from the start of trading, and losses extended into midafternoon trading. As of 2 :30 p.m. ET, shares traded down more than $17 a share, a drop of more than 11.6%.

Operating income in constant currency fell 22.7% to $5.3 billion. The U.S. operation, which generates the bulk of Walmart’s business, posted an 18.2% year-on-year decline to $4.46 billion.

Total revenue unadjusted for currency changes rose 2.6% to $141.9 billion, Walmart said.

Walmart’s updated full-fiscal-year guidance was a mixed bag. Revenue is projected to increase between 4.5% and 5%, excluding the impact of divestitures, the company said. The U.S. operations’ revenue should increase by 3.5% excluding the impact of volatile fuel costs. However, earnings-per-share growth will be flat to up 1%, while operating income will fall 1%.

E-commerce revenue rose 1% year-over-year as more consumers shifted their buying to stores from online.

In a statement, Doug McMillon, Walmart’s president and CEO, called the bottom-line results “unexpected.” McMillon told analysts that cost surges in the second half of the quarter, triggered in part by Russia’s invasion of Ukraine which began Feb. 24, happened “very quickly” and put Walmart in catch-up mode. 

The company said it continues to face cost-inflation issues, especially related to food. General merchandise cost inflation may peak in the foreseeable future, Walmart said.

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Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.