Yahoo Finance Walmart’s 2Q16 Guidance and Key Earnings Trends
Walmart Earnings Preview: What Investors Can Expect in 2Q16
What Wall Street is expecting from Walmart’s 2Q16 results
Walmart (WMT) will declare its second-quarter results for fiscal 2016 on August 18. Consensus Wall Street analyst estimates project adjusted earnings per share (or EPS) of $1.125 in the quarter. That’s down 7% over 2Q15. The company’s guidance for EPS ranges from $1.06 to $1.18. Walmart’s wage increases for associates announced earlier in the year are expected to reduce EPS by $0.04 per share in 2Q16.
Forex headwinds
Foreign exchange headwinds are also expected to affect the company’s performance. The company derived ~28.3% of its sales from outside the United States in fiscal 2015. Moreover, the company plans to grow its international presence. Walmart anticipates a -$0.04 impact from the higher US dollar in 2Q16.
Walmart has grown its sales at a CAGR of 3.5% over the past five years. That compares to a sales growth rate of 9.9% for Dollar General (DG), 10.5% for Dollar Tree (DLTR), and 9.5% for Costco (COST) over the same period.
Supplier pressures
As its top-line growth rates are significantly slower than peers’, Walmart has been on the lookout for cost-saving opportunities. On June 24, Reuters reported that Walmart circulated a letter to its suppliers, asking them to pay a fee to Walmart for stocking and warehousing their products. This would help Walmart increase its store footprint, fund supply chain costs, and keep prices low.
Walmart’s considerable dominance of the US grocery market has given the company significant leeway to exert pressure on suppliers in order to lower costs.
Other cost factors that may affect Walmart’s bottom line include higher discounting and freight costs. As the West Coast ports logjam issue has resolved, retailers have faced surplus inventory. This may result in higher discounting as retailers rush to dispose of surplus stock.
That said, Walmart’s US earnings should continue to benefit from lower fuel prices versus last year. Not only do these lower prices increase discretionary (XLY) income for consumers (XLP), but they also tend to increase store traffic and may improve basket size and conversion rates.
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