Source: PaxForex Premium Analytics Portal, Fundamental Insight
The international retail titan will report its earnings for the third quarter of the fiscal year 2022 as early as next Tuesday. No doubt Walmart benefited early in the pandemic when it was recognized as a major retailer and allowed to keep its store doors open while many other businesses were forced to close. As a result, sales have grown for the company, which has boasted annual revenues of more than $500 billion for four consecutive years.
The economy is reopening, creating new challenges for businesses, including Walmart. Customer demand remains high while production is limited, and the imbalance of supply and demand is driving up prices for both businesses and consumers. It will be interesting to see if Walmart can use its large scale to keep costs under control when the company reports its third-quarter earnings results.
Even though consumers have a choice of where to spend their money, Walmart continues to increase sales. In its most recent quarter ended July 31, Walmart posted revenues of $141 billion, up 2.4 percent from the same quarter a year ago.
Management expects the sales momentum to continue into the third quarter. They expect comparable-store sales growth of 6-7%, excluding the impact of new store openings and closings.
Meeting customer demand with sales close to $150 billion per quarter is no easy task in a normal business environment, and these are not normal times. A COVID-19 outbreak at one manufacturing facility could shut down production for weeks. In addition, port congestion and a widely known shortage of drivers make it difficult to transport goods to customers. The disruptions drive up prices on everything from materials to labor.
Management said it has seen stronger-than-normal cost pressures and is using its buying power to protect its profits by offering low prices to its customers. Walmart remains confident in its ability to cope with rising prices and predicts that its operating profit will rise 11.5 percent to 14 percent in fiscal 2022, with two quarters to go.
Wall Street analysts expect Walmart to post third-quarter revenue of $135.5 billion and earnings per share (EPS) of $1.39. If the company achieves its projected earnings per share, it would represent a 3.7% increase over the same quarter last year.
Wall Street's estimate is on the higher end of management's EPS forecast for the quarter, from $1.30 to $1.40. Wall Street seems to think Walmart won't have much trouble controlling costs when the company reports third-quarter earnings on Nov. 16. Shareholders hope they are right. So far, Walmart stock is up a modest 3.9%. Perhaps a convincing demonstration of buying power will be enough of a boost to the retail giant's stock.
Let's not forget the upcoming holidays. The coronavirus seriously damaged last year's holiday spirit. But this year, people are ready to forget about the pandemic and enjoy the holidays they grew up on. For many, those holidays are starting now with holiday shopping.
Many retailers have rolled out big Black Friday-style sales early in the year to encourage shoppers to do their holiday shopping early and beat the supply chain crisis.
Walmart's offerings include great deals on everything from appliances and toys to apparel, home goods, and cosmetics. The company also used the opportunity to further promote its Walmart+ membership by offering members early access to deals. And to attract shoppers, many of the best holiday deals are available only in-store.
The retailer is partnering with Netflix to offer branded merchandise based on its most popular series, including "Stranger Things" and "Squid Game," and even offers a dedicated Netflix hub on its website. Continuing to address supply chain issues, Walmart chartered its own ships and held a supply chain hiring event.
As long as the price is above 146.90, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 148.39
- Take Profit 1: 156.10
- Take Profit 2: 158.20
Alternative scenario:
If the level of 146.90 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 146.90
- Take Profit 1: 143.50
- Take Profit 2: 141.50
