With the Q2 earnings season way into its second half, most of the U.S. corporations have delivered better than expected results. Yesterday it was Walmart’s turn, and it did not disappoint investors.
The sector benefited from the pandemic as people hoarded more food and other goods due to the uncertainty about the disease and what the future may bring. U.S. online sales at Walmart increased dramatically, being responsible for a big chunk of the better than expected quarterly earnings.
Walmart Share Price at All-Time Highs
The overall performance of Walmart share price is nothing short of impressive. It currently sits at all-time highs, closing yesterday at $134.71 and tackling the $140 level.
What is important to remember here is that this is a dividend-paying company. It has a dividend growth history of 47 years, a dividend payout ratio of 40.2% and 2% five-year growth rate. In other words, it knows how to reward its investors and keeps delivering solid results.
The last quarter was marked by the U.S. economy being in lockdown. Many states reported decreased economic activity and people worked remotely, if not being laid off. The U.S. Congress stepped in and sent checks to people in the form of “helicopter money”. Walmart was one of the main beneficiaries, as people had more money to spend (many received more than they used to earn in their jobs prior to the pandemic).
Coming back to yesterday’s report, Walmart announced 97% e-commerce net sales growth and a 27% increase in comparable average ticket. It remodels 45 stores and offers same-day delivery in more than 2,000 locations, and it did not open new stores.
The gross profit rate increased by 42 basis points, and operating income jumped 8.5%. Because of the government stimulus spending, sales of higher-margin and general merchandise categories increased.
International operations performed well too. In the United Kingdom, China, Mexico, Central America and Canada, the comparable ticket increased significantly – from 20.5% in China to 73.8% in the United Kingdom. E-commerce sales exploded internationally, too – in China, for instance, the growth rate exceeded 200%. Net sales grew in every country but one – the United Kingdom.
All in all, strong results that reward investors’ expectations. Emphasizing again that this is a dividend-paying company, the current stock market price reveals strong performance as a result of solid business principles.
If the pandemic helped in the meantime, that is secondary.