it’ll be a strong holiday quarter

Walmart Inc (NYSE: WMT) reported market-beating results for its fiscal third quarter and raised guidance for the future. Shares, however, are still down more than 2.0% this morning on fears that inflation could weigh on its margins in Q4.  

CEO Doug McMillan’s remarks on CNBC’s ‘Squawk Box’

CEO Doug McMillan, however, is confident that Walmart is ready for a “strong holiday quarter” with sufficient inventory and workforce. On CNBC’s “Squawk Box”, he said:

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We’ve got enough inventory to drive sales and are in full employment at Sam’s Club and Walmart U.S. We’re not as concerned about that as we would’ve been, say, two months ago. We’ve hired a lot of people to help with eCommerce fulfilment and in our supply chain as well as in our stores.

According to the chief executive, Walmart is committed to keeping the prices down as reflected in its cost inflation, which is higher than its retail inflation, which, as per Jim Cramer, is why the gross margin was hit in the recent quarter.

He, however, suggests investors focus more on the fact that Walmart is expanding its market share.

Q3 financial results

Walmart reported $3.11 billion in net income that translates to $1.11 per share. In the comparable quarter of last year, it had posted $5.14 billion in net income instead, or $1.80 per share. On an adjusted basis, the retail giant earned $1.45 per share.

The American multinational generated $140.54 billion in revenue – an increase from $134.71 billion last year. According to FactSet, experts had forecast $1.40 of adjusted EPS on $135.43 billion in revenue.

Comparable sales

Other notable figures in the Q3 report included an 8.0% increase in U.S. digital sales; up 87% from 2019 equivalents. Walmart international sales noted a 20.1% decline but its domestic comparable sales excluding fuel were up 9.2% versus 6.4% expected.

Ahead of the holiday season, U.S. inventory is up 11.5%, the retailer disclosed in the earnings press release.

Full-year guidance

For the full financial year, Walmart now forecasts $6.40 of adjusted per-share earnings on a 6.0% annualised growth in U.S. comparable sales. Analysts, on the other hand, are calling for $6.34 in adjusted EPS on a 0.8% growth in U.S. same-store sales.

Last month, Goldman Sachs added Walmart to its “Americas Conviction List”. The investment bank rates the retailer at “buy” with a price target of $180 that represents an over 25% upside from here.