General merchandise comps gained but fuel prices gnawed at Walmart during the first quarter as the retailer posted overall sales and earnings advances during the period.
Walmart reported it would pursue refunds for International Emergency Economic Powers Act tariffs, although it noted the material effect would be limited even if the company received all it claimed, and that any progress on that front would not affect financial guidance for the year.
Company net income was $5.33 billion, or 67 cents per diluted share, versus $4.49 billion, or 56 cents per diluted share, in the quarter a year earlier, Walmart noted. Adjusted for one-time events, the company’s diluted earnings per share were 66 cents versus 61 cents in the year-prior period.
An analyst consensus estimate from Zacks Investment Research pegged earnings per adjusted diluted share at 65 cents and revenues at $174.56 billion.
Net sales were $175.68 billion and total revenues were $177.75 billion versus $163.98 billion and $165.61 billion, respectively, in the year-previous quarter, the company reported. Operating income was $7.49 billion versus $7.14 billion in the year-before period, while adjusted operating income was $7.5 billion versus $7.14 billion.
At Walmart U.S., net sales were $117.17 billion versus $112.16 billion and operating income was $5.9 billion versus $5.7 million in the year-past period, while adjusted operating income was $6.02 billion versus $5.7 billion. Comparable sales, excluding the impact of fuel price volatility, were up 4.1% year over year.
At Sam’s Club, net sales were $23.41 billion and operating income was $674 million versus $22.06 and $666 million, respectively, in the year-past period. Comps sans fuel were up 3.9% year over year.
Walmart reiterated full-year financial guidance. As it announced fourth-quarter financials, Walmart’s outlook was for net sales growth of 3.5% to 4.5% and adjusted earnings per share of $2.75 to $2.85.
John Furner, Walmart president and CEO, said on a conference call that U.S. general merchandise comps were positive for the quarter. As part of the call, he provided an update on company operations. Among the points that he made was that when consumers engage with Sparky, the company’s AI agent generates an “average order value about 35% higher than non-Sparky customers.”
Furner said sales via Walmart’s marketplace grew almost 50% in the U.S. during the quarter. Enterprise e-commerce sales advanced 26%, and Walmart U.S. delivery grew 45%. In addition, enterprise membership fees increased by 17%, with growth led by Walmart U.S.
John David Rainey, Walmart executive vice president and CFO, pointed out on the call that 5% adjusted operating income growth in constant currency during the quarter was in line with guidance despite higher-than-anticipated fuel costs. Walmart absorbed about $175 million, or 250 basis points, of operating income growth due to higher-than-planned fuel costs in the company’s global distribution and fulfillment operations.
“If the current elevated cost environment persists, we’d expect somewhat higher retail price inflation in Q2 and the second half of the year,” Rainey said. “Importantly, we’re reiterating the original full-year guidance that we provided in February before the significant increases in fuel cost. We said at that time that we believed first-quarter operating income growth would be the lowest of any quarter and that profitability would improve thereafter. We still believe that to be the case.
Rainey said the company guidance does not assume any impact from IEEPA tariff refunds, and he added that Walmart is participating in the process to recover duties and believes the maximum refunds it might be eligible to receive as an importer of record represent less than half of 1% of its U.S. annual sales.
In terms of merchandise in the marketplace operation, Rainey said general merchandise categories performed especially well, as expanded assortments contributed to strong results in segments such as patio and garden, sporting goods, furniture and toys.
In announcing the financial results, Furner said, “Our results reflect our continued focus on delivering across the enterprise, better shopping experiences, a broader assortment and faster delivery. Our teams are adopting innovative technologies, driving productivity through automation and growing higher-margin commerce solutions. It’s a disciplined approach that’s helping us grow the business and strengthen returns.”
