Walmart Wins in Q2 with Digital Strength Carrying the Day

Walmart had a powerful one-two punch in Q2; the strength of its digital sales combined with quick delivery boosted sales and earnings in the second quarter of 2019. Domestic comparable sales increased by a very solid 2.8%, and e-commerce revenues grew by a whopping 37%. Total global revenues in the quarter were $130.4 Billion. This is an increase of $2.3 Billion. The strength of the company is its domestic Walmart operation, which reported sales of $85.2 Billion. That is 65.3% of total sales.

“From a performance point of view, we’re pleased with the strength we see in the business. Customers are responding to the improvements we’re making, the productivity loop is working, and we’re gaining market share. We’re on track to exceed our original earnings expectations for the year, and that’s possible because of the work our associates do every day,” said Doug McMillon, President and CEO of Walmart.

Walmart has been working on having fast deliveries to the home or at pick-up stations. Next-day deliveries are now available in 75% of the United States. This quick turnaround is especially important for fresh groceries; they can now be picked up at 2,700 locations or delivered to the home from 1,100 locations.

Management has raised expectations for comparable store sales, operating income, and earnings per share for the year. Domestic comp sales gains are now expected to be at the upper end of 2.5% to 3.0%, excluding fuel. Operating income, excluding Flipkart, should show an increase in the low-middle single digit percentage range, and EPS gains should be in the high single digit percentage range, excluding Flipkart. Last year, the company reported $2.26 per share. 

Management has indicated that it is looking for alternative sources of supply, thus avoiding the impact of possible tariffs and any negative consumer reactions to them. All of this points to a strong year for Walmart and will improve its competitive position in the market.

Source: Forbes
Source: Walmart release Q2 2019 results

 

Home Depot Stock Rises on Better-Than-Expected Profits Even as the Company Lowers Outlook on Tariff Worries

Home Depot’s fiscal second-quarter sales missed analysts’ expectations, and the company lowered its sales outlook for the year amid fears that the trade war will slow consumer spending. But its earnings topped estimates, and analysts say that positions Home Depot well for the back half of 2019.

Home Depot CEO Craig Menear said the company trimmed its 2019 outlook due to  “continued lumber price deflation, as well as potential impacts to the U.S. consumer arising from recently announced tariffs.” 

“While trade discussions are fluid, consumer demand could be impacted,” Edward Decker, executive vice president of merchandising, told analysts on a conference call.

The company has estimated that the currently proposed 10% tariffs, set to take effect Sept. 1 and Dec. 15 — along with the 25% tariffs already in place — could raise its cost of sales by about $2 billion, or about 2% of annual sales. Analysts say Wall Street largely already knew this impact to Home Depot’s business, thus why shares aren’t selling off on the news.

Here’s what Home Depot reported for the fiscal second quarter of 2019 compared with what analysts were expecting, based on Refinitiv data:

  • Earnings per share, adjusted: $3.17 vs. $3.08 expected
  • Revenue: $30.84 billion vs. $30.99 billion expected
  • Same-store sales: up 3% vs. growth of 3.5% expected

Net income for the quarter ended Aug. 4 was $3.48 billion, or $3.17 per share, compared with $3.51 billion, or $3.05 a share, a year ago. That beat expectations for earnings of $3.08 a share, based on Refinitiv data.

Sales climbed 1.2% to $30.84 billion from $30.46 billion a year ago, short of expectations for $30.99 billion.

Home Depot is now calling for fiscal 2019 sales to be up about 2.3%, and same-store sales to be up about 4%. Previously, it was calling for total sales growth of 3.3% and same-store sales growth of 5%.

It’s still expecting earnings per share to grow by about 3.1% to $10.03 for the year.

Home Depot said the average shopper’s ticket grew 1.7% during the second quarter to $67.31 from $66.20 a year earlier. 

“We are encouraged by the momentum we are seeing from our strategic investments and believe that the current health of the U.S. consumer and a stable housing environment continue to support our business,” Menear added.

Home Depot shares, which are valued at $238.9 billion, closed August 20th up 4.4%. The stock has climbed more than 26% this year.

Source: CNBC

 

Target Q2 Profit Tops Estimates, Lifts Fiscal Year 2019 Forecast

Target completed 84 remodels across the country in the second quarter and is nearly halfway to its goal of remodelling about 300 stores this year. The investments in stores are elevating the guest experience and allowing Target to reach guests in new communities. The company opened four small-format stores in important growth markets.

Nearly one in five guests who placed a same-day order in Q2 were placing a digital order with Target for the first time. The total number of stores for the second quarter was 1,853, up from 1,835 in the previous year quarter.

Here are the highlights:

  • Second quarter comparable sales grew 3.4%, driven by 2.4% traffic growth.
  • Comparable sales have grown approximately 10% over the last two years — the best performance in more than a decade.
  • Second quarter comparable digital channel sales grew 34%.
  • Same-day fulfillment services (Order Pick Up, Drive Up and Ship) accounted for nearly 1.5 percentage points of the Company’s overall comparable sales growth.
  • Second quarter operating income of $1.324 billion was 16.9 % higher than a year ago. 
  • Operating income margin rate improved 80 basis points compared with last year, reflecting year-over-year improvement in both gross margin and SG&A rates.
  • GAAP EPS from continuing operations and Adjusted EPS of $1.82 were up over 20% from last year and established new all-time highs for the Company.
  • Target now expects full-year 2019 GAAP EPS from continuing operations and Adjusted EPS of $5.90 to $6.20, compared with the prior range of $5.75 to $6.05.

Source: Alpha Street
Source: Target release Q2 2019 results

 

Lowe’s Stock Soars After the Retailer Beats Second-Quarter Earnings and Revenue Estimates

On August 21st, Lowe’s Companies, Inc. reported net earnings of $1.7 billion and diluted earnings per share of $2.14 for the quarter ended Aug. 2, 2019, compared to net earnings of $1.5 billion and diluted earnings per share of $1.86 in the second quarter of 2018.

Excluding $14 million of pre-tax operating losses associated with the wind-down of the Company’s Mexico retail operations, adjusted diluted earnings per share* increased 3.9% to $2.15 from adjusted diluted earnings per share1 of $2.07 in the second quarter of 2018.

Sales for the second quarter increased 0.5% to $21.0 billion from $20.9 billion in the second quarter of 2018, and comparable sales increased 2.3%. Comparable sales for the U.S. home improvement business increased 3.2%.

“We capitalized on spring demand, strong holiday event execution and growth in Paint and our Pro business to deliver strong second quarter results. Despite lumber deflation and difficult weather, we are pleased that we delivered positive comparable sales in all 15 geographic regions of the U.S.  This is a reflection of a solid macroeconomic backdrop and continued momentum executing our retail fundamentals framework,” commented Marvin R. Ellison, Lowe’s president and CEO.

Delivering on its commitment to return excess cash to shareholders, the company repurchased $1.96 billion of stock under its share repurchase program and paid $382 million in dividends in the second quarter.

As of Aug. 2, 2019, Lowe’s operated 2,003 home improvement and hardware stores in the United States and Canada representing 208.8 million square feet of retail selling space.  Lowe’s is actively hiring full- and part-time associates at its corporate locations, stores and distribution centres, and has filled more than 14,000 positions since July 1.

*Adjusted diluted earnings per share is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures Reconciliation” section of this release for additional information as well as reconciliations between the Company’s GAAP and non-GAAP financial results.

Lowe’s Business Outlook Fiscal Year 2019 (comparisons to fiscal year 2018)

  • Total sales are expected to increase approximately 2%.
  • Comparable sales are expected to increase approximately 3%.
  • Operating income as a percentage of sales (operating margin) is expected to increase 310 to 340 basis points.
  • Adjusted operating income as a percentage of sales (adjusted operating margin) is expected to increase 20 to 50 basis points.
  • The effective income tax rate is expected to be approximately 24%.
  • The target leverage ratio is 2.75x, therefore the company expects to repurchase approximately $4 billion of stock.
  • Diluted earnings per share of $5.54 to $5.74 are expected for the fiscal year ending Jan. 31, 2020.
  • Adjusted diluted earnings per share1 of $5.45 to $5.65 are expected for the fiscal year ending Jan. 31, 2020.

Shares surge after financial release

Lowe’s shares surged after the home improvement retailer’s second-quarter earnings report beat Wall Street forecasts and topped rival Home Depot on same-store sales growth in the U.S. The report — which exceeded analyst estimates on earnings, revenue and same-store sales — showed that changes made by CEO Marvin Ellison have started to take root and draw more customers. The company’s stock gained more than 10%, closing at $108 a share on August 21st.

Source: CNBC
Source: Lowe’s release Q2 2019 results

 

Horacio Barbeito Appointed President and CEO of Walmart Canada

On August 26, 2019 Walmart Canada announced the appointment of Horacio (Haio) Barbeito to the position of President and CEO, effective in October, pending work authorization. Barbeito joined Walmart nearly 25 years ago and developed his career through leadership roles in Argentina, the United States, Puerto Rico and Chile.

“We’re pleased that Haio’s next role will be leading Walmart Canada, where the team will benefit from his engaging approach and breadth of experience,” said Dirk Van den Berghe, EVP, Walmart and Regional CEO, Asia and Canada. “During his time in Argentina and Chile, Haio has led the business to consistently deliver strong performance while at the same time focusing on people through digital talent acquisition, talent development, and diversity and inclusion – resulting in increased engagement across the business.”

“I’m very excited by the opportunity to lead the Walmart Canada team,” said Barbeito. “We will continue to work to drive the growth and innovation our Canadian customers expect.”

The company announced that after a long and impressive 23-year career at Walmart, Lee Tappenden, the current Walmart Canada President and CEO, will be leaving the company at the end of the year. Tappenden will work with Barbeito through October and will then take on a global role as part of the International Support Team focusing on global sourcing and supplier leverage until his departure on January 31, 2020.

Source: Walmart