Wednesday, May 19, 2021

Walmart Smashes Q1 Expectations on Stimulus Checks


News shaping
the markets today


What’s happening: Shares of Walmart rose on Tuesday, after the retailer reported stronger-than-expected results for its fiscal first quarter.

What happened: Walmart witnessed a return of shoppers to its stores across the country, with people having received fiscal stimulus checks.

The world's biggest retailer also raised its full-year earnings projections due to potentially higher demand with the easing of covid-19 restrictions.

How were the results: Walmart reported revenue growth for the first quarter, with both top- and bottom-line metrics exceeding market views.

  • Total revenues grew 2.7% to $138.31 billion, surpassing the consensus estimate of $132 billion.
  • Net income stood at $2.7 billion, or 97 cents per share, down from $4 billion, or $1.40 per share, in the same quarter last year.
  • Adjusted earnings came in at $1.69 per share, topping market expectations of $1.21 per share.

Why it matters: Although Walmart had forayed into ecommerce almost a decade back, the real efforts to push this business came last year amid the pandemic-induced lockdowns. The Bentonville, Arkansas-based retailer executed well online and delivered a strong performance in 2020.

Although the online shopping trend is likely to continue, Walmart said that shoppers were also returning to brick-and-mortar outlets following a rise in covid-19 vaccinations. The big-box retailer recently announced to allow fully vaccinated shoppers to enter its stores without wearing masks.

Walmart’s same-store sales in the US climbed 6% during the fiscal first quarter, as shoppers purchased more apparel and home improvement items. The company also reported growth in online sales, albeit with a deceleration to 37%, versus 74% in the year-ago quarter and 69% in the previous quarter. Walmart has been pumping massive investments into its online business in a bid to compete with rival Amazon.

“This was a strong quarter. Every segment performed well, and we’re encouraged by traffic and grocery market share trends. Our optimism is higher than it was at the beginning of the year,” CEO Doug McMillon said during the earnings call.

Management guided to profit growth in the high single digits for the current fiscal year. This compares well with the company’s earlier projection of a slight decline in earnings for the year.

How shares responded: Walmart’s shares spiked 2.2% to close at $141.91 on Tuesday, after the company released its quarterly results. The stock has gained a little over 3% over the past three months.

What to watch: Markets will keep an eye on the covid-19 vaccine rollout and the footfall at Walmart’s stores. Investors will also monitor the company’s ecommerce business.

The Markets Today


European stocks will be in focus today, ahead of inflation data from the region.

Context: European stocks closed mostly higher on Tuesday, after starting the week on a lower note amid concerns around higher inflation and a rise in covid-19 cases.

Details: Markets in Europe recovered on Tuesday, after closing lower in the previous session, as global investors remained worried about inflationary pressures in the EU and the US as well as the emergence of a new coronavirus variant in India.

On Monday, the WHO (World Health Organization) cautioned that the covid-19 pandemic was not over yet, despite some countries reporting high vaccination rates. Various regions, including Singapore and Taiwan, have reported a resurgence in infections, forcing authorities to impose stricter restrictions.

Investors also shrugged off weak economic data from the Eurozone. The region’s GDP contracted by 0.6% in the first quarter, technically marking the bloc’s entry into a recession. The Eurozone’s employment also dropped 0.3% in the first quarter.

Several companies released earnings on Tuesday, with Vodafone missing market estimates, which sent shares of the British telecom company lower by around 9%. Meanwhile, Sonova’s stock jumped over 11% after the Swiss hearing aid company projected strong growth for the full year.

The pan-European Stoxx 600 gained around 0.2%, with travel and leisure shares among the top performers, adding around 1.5% on Tuesday. Telecom stocks bucked the trend and fell more than 1%, with shares of Iliad and Vodafone weighing on the category.

While the German DAX 30 slipped 0.07% in the previous session, the FTSE MIB gained 0.07% and the IBEX 35 added 0.31%. London’s FTSE 100 also gained 0.02%.

What to watch: Investors await data on new passenger car registrations and inflation rate from the Eurozone. Registrations of new passenger cars, which surged 87.3% to 1,062,446 units in March, are expected to jump 200% in April. The Eurozone’s consumer price inflation is projected to rise to 1.6% in April.

Rising covid-19 cases remains a top concern for markets, with total global infections surpassing 163.9 million.

Other Markets: US indices closed lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.78%, 0.85% and 0.72%, respectively.

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What else to watch today


UK’s inflation rate, retail price index and producer prices, South Africa’s inflation rate and retail sales, America’s MBA mortgage applications, crude oil inventories and FOMC minutes, Canada’s inflation rate as well as Argentina’s leading economic index.