The ending of earnings season is upon us; thank goodness! I’ll be posting twice this week: today and Thursday. Following that, I’ll most likely return to including these within my weekly Sunday updates.
Today, I’ll be covering Walmart and The Home Depot.
Walmart (WMT) – Q3 (Fiscal Q3 2023) Earnings
Walmart beat analyst expectations for the quarter, with the stock rising by 6% on the day. Though, the company did acknowledge that customers are beginning to change their behaviour. They are beginning to trade-down to cheaper brands and are being more cautious with their spending.
Key Points:
- Revenue of $152,813m, up from $140,525m (+8.7%) a year ago
- Gross profit of $37,200m, up from $35,502m (+4.8%) a year ago
- Cost of sales increased to $115,613m, up from $105,023m (10.1%) a year ago, again illustrating the effects of inflationary pressures on both goods and wages
- Gross profit margin dipped slightly to 24.3%, compared to 25.3% a year ago
- Operating profit of $2,695m, down from $5,792m (-53.5%) a year ago
- Loss before tax of ($1,431m)
- Loss after tax of ($1,767m)
- Loss per share of ($0.66) (adjusted EPS of $1.50)
- Dividend of $1.50 per share to be paid on 3rd January 2023
- Q4 (Fiscal Q4 2023) guidance for revenue suggests growth of around 3%, with a continued impact due to unfavourable exchange rates. Operating income is expected to stay flat, while adjusted earnings per share will decline slightly, by between 3%-5%
- Walmart was hit with a ~$3,300m settlement cost relating to opioid-related lawsuits
- Walmart’s ad business related to their online sales grew over 30% YoY
- The company continues to better control its excess inventories, up 13% YoY compared to Q2’s 26% and Q1’s 32%
- The company continues to attract more high-income earners (over $100,000). They are putting measures in place to retain its now budget-conscious customers on lower incomes by retaining prices of certain products at last year’s prices. For example, many of the traditional foods eaten at thanksgiving, including turkey, are being sold at 2021 prices (likely at a loss). This is in an attempt to absorb some of the pressures on customers
The Home Depot (HD) – Q3 Earnings
Similar to Walmart, The Home Depot has also beaten analysts’ expectations this quarter, despite all the inflationary and currency headwinds they are facing.
Key Points:
- Revenue of $38,872m, up from $36,820m (+5.6%) a year ago
- Gross profit of $13,224m, up from $12,563m (+5.3%) a year ago
- Cost of sales increased to $25,648m, up from $24,257m (+5.7%) a year ago. This is interesting, as the increase is in-line with revenue despite inflationary pressures seen in almost all industries, signalling that prices have stayed roughly flat within the home improvement space compared to a year ago
- Operating profit of $6,148m, up from $5,795m (+6.1%)
- Profit before tax of $5,742m
- Profit after tax of $4,339m
- Earnings per share of $4.25
- Dividend of $1.90 per share announced, to be paid on 15th December 2022
- Guidance remains unchanged from previous forecasts. Sales growth for the full year is expected to increase by around 3%, with an operating margin of 15.4%
Do you invest in any of these companies? Have these earnings changed your view about the company’s prospects in any way? Let me know in the comments!
