Walmart’s Q1 2018 Results – Comments

I found various notable items in Walmart’s Q1 2018 management call transcript (pdf) dated May 18, 2017.  (as well, there is Walmart’s press release of the Q1 results and related presentation materials)

I view Walmart’s results and comments as particularly noteworthy given their retail prominence and focus on low prices.  I have previously commented on their quarterly management call comments; these previous posts are found under the “paycheck to paycheck” label.

Here are various excerpts that I find most notable:

comments from Doug McMillon, President and CEO, page 3, wrt Walmart U.S.: :

Comp store sales grew 1.4 percent and comp store traffic improved 1.5 percent. We got off to a slower start than expected, due in part to delayed federal tax refund checks, but saw sales strengthen throughout the quarter. We also continued to manage the business well from an inventory and availability standpoint.

comments from Doug McMillon, President and CEO, page 4:

In U.S. eCommerce, we like the traction and we are working hard to make even more improvements. Walmart.com launched two new initiatives in the quarter. First, we made the change to shipping terms at the beginning of the quarter. Customers don’t have to pay a membership fee to get two-day shipping on millions of items. Second, we recently began offering customers pick-up discounts on non-store items. Our stores are located within 10 miles of nearly 90 percent of the U.S. population—so this is convenient for many of our customers, and also saves them money when they order online and pick it up during their visit to our stores.

comments from Brett Biggs, EVP & CFO, page 7:

Gross profit margin increased 1 basis point during the quarter. The rate for Walmart U.S. was flat, while Walmart International was up slightly.

comments from Brett Biggs, EVP & CFO, page 8, wrt Walmart U.S.:

You will recall in our fourth quarter comments that the first quarter started out slower than anticipated from a sales standpoint, due in part to the delayed issuance of federal income tax refund checks. As anticipated, our sales strengthened as the quarter progressed, delivering comp sales growth of 1.4 percent, led by an increase in customer traffic of 1.5 percent. This marks the 10th consecutive quarter of positive comp traffic. On a twoyear stacked basis, comp traffic is up 3 percent. Average ticket declined slightly primarily due to lower sales of higher ticket items at the beginning of the quarter, as well as continued price investment. Additionally, the grocery business continued to improve with food categories delivering the strongest quarterly comp sales performance in more than three years, due in part to a lack of market deflation in food, excluding price investments.

comments from Brett Biggs, EVP & CFO, page 9, wrt Walmart U.S.:

Gross margin rate was flat in the quarter. Savings from procuring merchandise and the acceleration of post-holiday markdowns taken in the fourth quarter benefited the margin rate, but this was offset by investments in price and the mix effects from our growing e-commerce business.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 2357.03 as this post is written