Analysts estimate adjusted EPS of $1.55 vs. $1.56 in Q2 FY 2021.
U.S. comparable sales growth is expected to decelerate sharply YOY.
Revenue is expected to decline slightly after elevated growth rates last year and early this year amid the COVID-19 pandemic.

Walmart Inc. (WMT) is offering special bonuses and temporary pay raises to employees as it prepares for the coming holiday shopping season. The company has introduced various incentives to keep its workers from chasing other opportunities in a competitive job market. Strong demand for labor as well as supply chain issues related to the COVID-19 pandemic have led to a tight hiring market in the U.S., posing a significant challenge to major retailers like Walmart.

Investors will be focused on Walmart’s rising labor costs, and the company’s overall financial performance, when it reports earnings on August 17, 2021 for Q2 FY 2022. Walmart’s 2021 fiscal year (FY) ended Jan. 31, 2021. The company now is in its 2022 fiscal year. Analysts expect both adjusted earnings per share (EPS) and revenue to decline slightly compared to the year-ago quarter.

Investors will also be focusing on Walmart’s U.S. comparable sales growth, a metric measuring the rate of growth generated by the company’s existing stores and clubs in the U.S., including e-commerce sales. Analysts expect comparable sales to rise, but at their slowest pace since the final quarter of FY 2020.

Shares of Walmart have dramatically underperformed the broader market over the past year. The stock mostly outperformed between mid-August 2020 and mid-December 2020 before gradually losing ground with the rest of the market. It hit a recent low in early March of this year but has since rebounded. Walmart’s shares have provided a total return of 15.2% over the past year, a little less than half the S&P 500’s total return of 32.5%.

Source: TradingView.

Walmart reported Q1 FY 2022 earnings that beat consensus estimates. Adjusted EPS surpassed expectations, rising 42.7% year over year (YOY). It was the fastest pace in at least 17 quarters. Revenue grew 2.7% compared to the year-ago quarter, also above forecasts. However, it was the slowest pace of growth since the final quarter of FY 2020. The company said that government stimulus had an impact on its results in the quarter.

In Q4 FY 2021, Walmart posted adjusted EPS that missed analysts’ expectations. Adjusted EPS rose just 0.8% YOY, the slowest pace since Q4 FY 2020. Revenue expanded 7.4% compared to the year-ago quarter, accelerating from Q3’s pace of 5.3%. Costs related to the pandemic in Q4 totaled $1.1 billion. The company said that it expected net sales and EPS to decline in FY 2022 due to anticipated divestitures.

Analysts are expecting slight declines in both adjusted EPS and revenue in Q2 FY 2022. Adjusted EPS is expected to fall 0.7% YOY, which would be the first decline since Q4 FY 2020. Revenue is forecast to dip 0.5% YOY, which would be the first decline in at least 17 quarters. For full-year FY 2022, analysts are currently forecasting adjusted EPS to rise 9.4%, which would be a slight deceleration from the previous year. Annual revenue is expected to fall 0.7%, which would be the first decline in at least the past five years.

Walmart Key Stats

Estimate for Q2 2022 (FY)
Q2 2021 (FY)
Q2 2020 (FY)
Adjusted Earnings Per Share ($)
1.55
1.56
1.27
Revenue ($B)
137.1
137.7
130.4
U.S. Comparable Sales Growth, excluding fuel (%)
3.0
9.9
2.6

Source: Visible Alpha

As mentioned above, investors will also be watching another key metric, Walmart’s U.S.comparable sales growth. Comparable sales, also referred to as same-store sales in the retail industry, measures the sales performance of the company’s stores and clubs that have been open during the previous 12 months. The metric includes sales from Walmart’s remodels, relocations, expansions, and conversions, as well as e-commerce sales. Comparable sales growth gauges a company’s ability to generate additional revenue from established stores. If the bulk of a company’s sales are being generated by established stores as opposed to new ones, this is a good sign that the company’s products have not yet saturated the local market.

Walmart’s U.S. comparable sales growth, excluding fuel, accelerated last year during the pandemic. U.S. comparable sales rose 8.9% in FY 2021 compared to 2.1%, 3.6%, and 2.6% in the three years prior to the start of the pandemic–FY 2018, FY 2019, and FY 2020, respectively. So far in FY 2022, U.S. comparable sales growth has begun to decelerate. In the first quarter, U.S. comparable sales grew 6.2% YOY, slower than in each of the past four quarters. Analysts expect a further deceleration in Q2 FY 2022, forecasting growth of just 3.0% YOY. That would be the slowest pace since the final quarter of FY 2020. For full-year FY 2022, analysts expect U.S. comparable sales to rise 3.5%, which would be more in line with the growth experienced in the years before the start of the pandemic.


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