Walmart (WMT) Sees FY19 EPS of $4.65-$4.80, Below Prior View

Today, Walmart will host its annual meeting for the investment community where its leadership team will discuss how the company is shaping its future, moving with speed and innovating for tomorrow to win for customers and shareholders. The company is also sharing select guidance metrics for the next fiscal year.

• The company reiterates its FY19 total sales growth expectations and updates FY19 GAAP and adjusted EPS to include the expected 25 cents per share Flipkart dilution.
• FY19 GAAP EPS guidance is now $2.65 to $2.801, and FY19 adjusted EPS guidance is now $4.65 to $4.801. This compares to previous guidance of GAAP EPS of $2.90 to $3.05 and adjusted EPS of $4.90 to $5.05. (*** consensus is $4.79)
• Walmart expects total FY20 sales growth to be 3 percent or greater, negatively affected by about 100 basis points due to the deconsolidation of the Brazil operations and planned reduction in tobacco sales at Sam’s Club.
• Walmart U.S. comp sales growth is expected to be in a range of 2.5 percent to 3 percent and eCommerce net sales growth is expected to be around 35 percent for FY20.
• FY20 operating income is expected to decline by a low single digit percentage range, but is expected to increase by a low single digit percentage range when excluding Flipkart in both FY19 and FY20.
• FY20 EPS is expected to decline by a low single digit percentage range versus FY19 adjusted EPS2. Excluding Flipkart, EPS is expected to increase by a low to mid-single digit percentage range versus FY19 adjusted EPS.

“We’re adapting and transforming with speed to better serve our existing customers and reach new ones,” said Walmart President and CEO, Doug McMillon. “We’re operating with discipline, balancing our short and long-term opportunities. While we’re excited about what we’ve done so far, we aren’t satisfied. As we execute today and build for tomorrow, our associates and unique omni-channel assets position us for success.”

McMillon will discuss:

• Progress over the past year at Walmart U.S., including strong traffic and comp sales, online grocery pickup and delivery, and associate empowerment and training.
• Walmart’s focus on price leadership, broad assortment and efforts to save customers more time by making shopping easier, faster and more enjoyable.
• Momentum in areas such as eCommerce, logistics and partnerships.
• Distinctive assets, key investments and acquisitions, including Flipkart in India.
• Innovations that are enabling Walmart to serve local communities and customers around the world, such as last mile delivery, reducing supplier emissions, pioneering blockchain for food safety at scale, and leveraging machine learning across the enterprise.
• How the company is utilizing this period of transformation in retail to invest thoughtfully, plant seeds for the future and generate solid financial results.

1Fiscal 2019 guidance provided in August 2018 did not include the impact of Flipkart as the transaction had not closed at the time the guidance was provided. GAAP EPS includes unrealized gains and losses on the JD.com investment and tax reform adjustments through the second quarter of fiscal 2019. GAAP EPS and adjusted EPS exclude the impact of other strategic decisions that could occur during the remainder of fiscal 2019. See additional information at the end of this release for the non-GAAP financial measure.

2 FY20 EPS is expected to increase versus FY19 GAAP EPS.

Financial Framework

Walmart CFO Brett Biggs will outline the company’s financial framework of strong, efficient growth, operating discipline and strategic capital allocation to drive long-term shareholder value.

Biggs commented, “I feel great about Walmart’s position in this rapidly changing retail landscape. We are leveraging our scale, assets and financial strength in ways unique to Walmart to enhance and build competitive advantages. We continue to operate with discipline, we’re strengthening our cost culture and we’re leveraging technology, data and analytics in new ways to be more productive. Our financial strength gives us the flexibility to deliver near-term results while making strategic decisions for the longer term.”

(**Street sees FY EPS of $4.79)

1 Guidance now incorporates the estimated impact for Flipkart, which includes the incremental interest expense to fund the transaction, as the transaction closed in the third quarter of fiscal 2019.

2 Calculated based on nature of item, including any realizable deductions, and statutory rate in effect for relevant jurisdictions.

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