walmart (WMT) beat the drop in profits and sales on Tuesday, with retail giant Dow Jones reaffirming its second-half forecast after cutting its forecast twice in the previous three months. WMT stock rose solidly. Target (TGT), which reports early Wednesday, also climbed.
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Walmart revenue
Estimates: Analysts predicted Walmart’s earnings would fall 9% to $1.62 per share. Analysts’ revenue target is $150.9 billion, up 7%.
Results: Walmart gained $1.77 per share from $1.78 a year earlier. Revenue rose 8.4% to $152.9 billion. Much of this sales gain reflects higher prices, which are a response to rising costs.
Walmart announced weak first-quarter earnings and budget guidance on May 17, then followed up with another warning on July 26.
The retail giant was left with unwanted big-ticket items like TVs as inflation-hit shoppers shifted to cheaper staples over spending on discretionary goods.
On Tuesday, Walmart reported that it was checking its inventory.
“The steps we’ve taken to improve inventory levels in the U.S., along with a stronger grocery sales mix, put pressure on second quarter profit margins and our outlook for the year,” CEO Doug McMillon said in a statement. “We made good progress throughout the quarter operationally to improve our supply chain costs and that work continues.”
Outlook: Retail giant Dow Jones still expects Walmart’s U.S. same-store sales to rise 3% excluding fuel in the second half, or 4% for the full year. Based on current exchange rates, the company said it expects a headwind of around $2.1 billion in the second half of 2022.
Walmart sees adjusted EPS for the full year down 9% to 11%. On July 25, the discount giant cut its estimates, predicting EPS would drop 11% to 13%. Analysts had forecast full-year earnings of $5.69 per share, down 11.9%.
For the third quarter, Walmart expects net sales growth of about 5% as well as a 9% to 11% decline in adjusted EPS.
Is Walmart Buy or Sell Right Now?
Walmart shares rose nearly 5% shortly after Tuesday’s open market trade. Stocks are above their 50-day line and trending toward their 200-day average, according to MarketSmith analysis.
The stock has a 48 composite score out of 99. It has a relative strength rating of 33, an exclusive IBD Stock Check stock price movement gauge with a score from 1 to 99. The rating shows how a stock’s performance over the past 52 weeks holds up against all other stocks in the IBD database. The EPS of the stock is 69.
Target earnings
Estimates: Wall Street predicts Target will earn 79 cents per share on $26 billion in sales.
Results: Check Wednesday before the market opens.
Early June, Target revised its guidance for the second quarter downwards. The Minneapolis-based company cut its second-quarter operating margin forecast to 2% from 5.3%.
The company also announced that it was planning price increases to deal with “unusually high transportation and fuel costs.” Additionally, Target also announced plans to eliminate excess inventory and cancel orders before the end of the second quarter.
“While these decisions will result in additional costs in the second quarter, we are confident that this rapid response will pay off for our business and our shareholders over time, resulting in improved profitability in the second half and beyond. “, CEO Brian Cornell said at the time.
Target made the decisions after missed revenue estimates, guided down on earnings and reported large inventories of unsold goods in the first quarter. These results sent Target stock to its lowest level since September 2020.
The target stock climbed 3% early Tuesday. TGT stock has moved back above the 10-week support, but it is still far from a 50-day falling line.
More retail revenue
Profits from Walmart and Target are part of a big week for retail stocks. Others to report during the week include off-price specialists TJX (TJX) and Ross Stores (ROST).
Walmart’s Dow Jones Peer Home deposit (HD) Q2 views in the lead early Tuesday, with a rival home improvement chain Lowe’s (DOWN) on tap Wednesday.
The annual inflation rate in July fell to 8.5% from 9.1% in June. The deceleration is largely due to lower gasoline prices, but federal data shows prices for food and other goods are still on the rise.
best buy (BBY), dollar tree (LTRD) and General dollar (CEO) were among other retail stocks that fell following Walmart’s warning in late July.
Target is third, behind Walmart and Costco (COST), in the Large retail chains industry group. The stock has a composite rating of 48. Its relative strength rating is 13 and its EPS rating is 82.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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