E-commerce to Play Key Role in Walmart's (WMT) Q2 Earnings
Walmart Inc.’s WMT second-quarter fiscal 2021 results, slated to release on Aug 18, are likely to reflect strength in e-commerce sales, especially thanks to its robust efforts to strengthen delivery services.
Walmart has been gaining from consumers’ rising demand for essential items amid the coronavirus pandemic. Further, increased stay-at-home trends to maintain social distance has led to an accelerated shift to online shopping. Well, this is where the e-commerce initiatives of supermarket players come into play and it is impressive to note that Walmart stands quite strong in this respect. The company’s U.S. e-commerce sales have been gaining on strength in grocery pickup and delivery, walmart.com and the marketplace. In its last earnings call, management said that it saw an increased shift to online shopping, given the higher stay-at-home trends.
Walmart has long been focused on bolstering omnichannel operations and ramping up delivery services to meet customers’ needs and stay firm amid the growing competition from Amazon AMZN. We note that these efforts become all the more relevant in the current scenario where social distancing has taken online shopping to a higher level. To make the most of the paradigm shift and cater well to consumers, Walmart is going all the way with its omnichannel efforts. One of the latest moves in this regard includes a partnership with Shopify.
The company has been particularly stepping up its delivery services, given the burgeoning demand for online grocery. To this end, its Sam’s Club division unveiled the launch of curbside delivery earlier this month. Additionally, Walmart added a feather to its delivery services cap by unveiling Express Delivery during the first quarter of fiscal 2021 at several stores, in order to deliver orders to customers in less than two hours. As part of its first-quarter earnings release, the company also said that it has improved its delivery and pickup services, launched pickup in China, expanded online grocery capacity in the U.K. and introduced contact-less delivery in Canada, among others.
Walmart Inc. Price and EPS Surprise
Walmart Inc. price-eps-surprise | Walmart Inc. Quote
Further, the company expanded its ship-from-store option temporarily to about 2,500 stores and extended curbside pharmacy pickup as well as mail-to-home options in the United States. Walmart also announced a partnership between Uber and Flipkart for the delivery of daily essentials. Such initiatives, together with Walmart’s prior moves to solidify its footing in the e-commerce space, bode well at a time when the pandemic has made online shopping all the more rampant. Even other retailers like Target TGT and Kroger KR are gaining from such trends.
Meanwhile, the Zacks Consensus Estimate for Walmart’s second-quarter revenues is pegged at $133.97 billion, indicating a rise of 2.6% from the figure reported in the year-ago quarter. The consensus mark for earnings has been unchanged over the past 30 days at $1.22 per share. This suggests a drop of 3.9% from the year-ago period’s reported figure.
Other Trends
Despite these upsides, in its last earnings call, management said that it expects operating income to remain under pressure in the near term. This could be due to the high COVID-19 costs, such as higher wages and benefits to employees, costs associated with sanitization and other safety measures. Incidentally, the company has been paying special cash bonuses to some of its workers. Apart from this, price investments and shift in sales mix to lower-margin channels and categories pose threats to the gross margin, which has been contracting year over year for a while now. (Read More: Factors to Analyze as Walmart Readies for Q2 Earnings)
Walmart currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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