1. Higher fuel costs could be a big headwind for retailers.
2. Erratic不定期規則 receipts of General Merchandise inventory impacted sales and margins 供應鏈阻塞, 零售業倉儲進貨變得很不穩定, 計算期末存貨困難, 會計影響gross margin
3.Mix shift to Grocery, exacerbated by higher food inflation, is driving gross margin contraction. Food at Home inflation is running at ~11% vs overall CPI at ~8%. As a result, even if actual consumption is unchanged, consumers' spending mix is naturally shifting to Grocery, which is a lower margin category. For low-income consumers in particular, food inflation is eating into discretionary dollars, which could be exacerbating the dilutive mix shift. WMT called out this dynamic as a driver of gross margin contraction in Q1 against a reasonably healthy (albeit inflation-driven) sales backdrop. We would expect to see a similar mix shift and consequent margin contraction at DG and DLTR given their higher exposure to low income shoppers, 低價零售店業績成長, 但毛利仍然微降 and potentially TGT as well given the degree of inflation (despite TGT's higher-income core customer)
4.The first major indication in our coverage of the low-income consumer feeling pinched. Related to point #3, the degree to which WMT's merchandise mix shift toward Grocery suggests at least some of WMT's customers are pulling back on discretionary purchases, particularly as food inflation (and other inflationary pressures like gas prices) exerts more pressure on low-income wallets. MS Economists believe low-income consumers have entirely exhausted their excess savings from stimulus; we expect this cohort 相同特徵 to further pull back on discretionary spending through the year, which is a negative read-through for retailers with low-income consumer exposure and some discretionary mix (including DG, DLTR, FIVE, and OLLI).
5. WMT took significant share in Grocery. WMT US Grocery comps were up low double digits, well ahead of key industry benchmarks including Nielsen data (+MSD%) and Census Retail Sales (+HSD%).WMT 股價表現超越產業指標 It's also a negative read-through for other consumables retailers, in our view. The positive is WMT's high absolute growth rate reflects persistent inflation, which should benefit all retailers. But that WMT is taking share off a large base 這句慢慢蒐集資料 - 檢視 (we estimate WMT took ~$6b of the ~$20b of incremental category growth in its fiscal Q1) is a less bullish read-through to other consumables retailers and conventional grocers like KR and ACI, though it's not clear exactly where WMT's share gains are coming from.
(Bloomberg) -- Walmart Inc. tumbled the most in almost 35 years after cutting its full-year profit forecast due to inflationary pressures, especially in food and fuel.
The worsening outlook shook Wall Street’s faith in Walmart’s ability to cope with higher costs for merchandise, transportation and labor. The results also underscored the pressure on US consumers as soaring prices send sentiment to the lowest in a decade. Walmart and peers already were facing tough comparisons to early 2021, when federal stimulus payments bolstered household spending during the coronavirus pandemic.
Chief Executive Officer Doug McMillon set the stage for more price increases at the world’s largest retailer, saying the company would seek to balance customers’ needs with the goal of delivering profit growth. His goal is to raise prices while seeking to stay below competitors and limiting the price bumps on entry-level food items.
“Price leadership is especially important right now,” McMillon told analysts. He pledged to vowed to put the disappointing quarter “behind us and have a strong year.”
Earnings are likely to drop about 1% this year, the retailer said in a statement Tuesday, abandoning its previous forecast for a mid-single-digit gain. In the first quarter, adjusted profit sank to $1.30 a share, below the lowest of 29 analyst estimates compiled by Bloomberg.
While revenue growth remained robust, U.S. sales of groceries accounted for much of the growth -- and they tend to have lower margins than general merchandise, sales of which fell. The results are a “clear negative,” Adam Crisafulli, an analyst at Vital Knowledge, said in a note to clients.
“One of the world’s largest and most sophisticated companies proved unable to escape the same corporate margin pressures hurting most firms and even the sales performance isn’t as good as it looks,” he said. That’s because revenue was “driven mostly by food inflation while the discretionary merchandise category slumped 10-11%,” he said.
The operating backdrop has become increasingly complex,” Edward Kelly, an analyst at Wells Fargo & Co., said in a report in which he referred to Walmart by its ticker symbol. “Consumers are starting to make tougher choices, and while WMT is well positioned for trade down as a value player, it needs to take more price.”
Surging fuel prices -- spurred in part by Russia’s invasion of Ukraine -- pushed up costs faster than Walmart was able to pass them along to consumers last quarter, McMillon told analysts. He also called out labor challenges and temporary overstaffing due to Covid, higher costs for containers and storage, excess inventory, and a shift in spending away from general merchandise, which typically has higher profit margins than groceries.
Lowering estimates and SOTP-backed PT to $156 (from $167). We are lowering our F'23/F'24 EPS estimates by ~5% to $6.40/$6.90 (from $6.75/$7.30 prior). Our F'23 EPS estimate is in-line with updated guidance and embeds +3.5% WMT US comps, ~4% net sales growth, ~5 bps ( 0.01%) of total gross margin contraction, ~15 bps
of S&GA leverage, and -1% EBIT/EPS growth. In F'24 we model +3% WMT UScomps, ~3.5% net sales growth, ~5 bps ( 0.01%) of EBIT margin expansion, and ~5.5%/~8% EBIT/EPS growth. Our SOTP-backed PT falls $11 or ~6.5%, with $5 driven by our updated estimates and SOTP assumptions, $5 from lower multiples on our US brick & mortar and Sam's Club EBITDA estimates, and $1 from mark to market JD.com numbers. Our PT implies ~22.5x our F'24e EPS of $6.90, which we estimate is ~20x on a "core" basis (ie excluding growth investments like Flipkart). We stay OW rated with ~19% upside to our $156 PT.
were spun off or bought by a different company. SOTP enables a company to establish a useful measure of its value which can be highly relevant in the case of a hostile takeover or a restructuring.
margin expansion (~4% EBIT growth). Alongside ~$1.6b of net interest expense, a 24.6% tax rate, and ~$8.3b of buybacks, this produces EPS of $16.55 (+6.5% y/y, slightly above the guided mid-single-digit increase). There could be upside to our ‘22 forecast. If HD’s qualitative commentary on elevated home price appreciation
driving Home Improvement demand is accurate and the business holds its 3Y geometric stacks at the current run rate (up in the low 40% range) 問題經濟數據 home decoration, furnishings 消費下降 , this would imply mid-single-digit comps in '22. Assuming similar flow through, ~$17 in ’22 EPS could be possible (a high-single-digit y/y increase).
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