Walmart Q1 Earnings Beat Estimates, E-Commerce Growth Supports Sales

Walmart Inc. WMT reported first-quarter fiscal 2026 results, with both revenues and earnings growing year over year and surpassing Zacks Consensus Estimate. The company continues to optimize operations for greater efficiency, balancing strategic investments with enhanced customer experiences. It experienced expanding e-commerce, increasing pickup options and accelerating delivery services. Newer ventures like the marketplace, advertising and membership have contributed to diversified profits, reinforcing the resilience of Walmart’s business model.

The company is not providing specific guidance for operating income and earnings per share (EPS) for the fiscal second quarter due to a highly uncertain and dynamic environment. However, management remains confident in its ability to navigate the headwinds and achieve its full-year guidance.

Walmart’s Quarterly Metrics: Key Insights

WMT’s adjusted earnings of 61 cents per share inched up 1.7% from the year-ago period’s 60 cents. The metric beat the Zacks Consensus Estimate of 57 cents.

Walmart’s total revenues rose 2.5% year over year to $165.61 billion despite a $2.4-billion headwind from foreign currency fluctuations and a 100-basis-point (bps) impact of lapping leap day. On a constant-currency basis, revenues grew 4%, reflecting strong performance across all business segments. Results topped the consensus mark of $165.59 billion.

Walmart’s Global e-commerce sales surged 22% as the digital mix increased across all segments. The upside can be attributed to store-fulfilled pickup and delivery services. The company witnessed a 14.8% increase in membership income. WMT’s global advertising business advanced 50%.

Walmart Inc. Price, Consensus and EPS Surprise

 

Walmart Inc. price-consensus-eps-surprise-chart | Walmart Inc. Quote

The consolidated gross profit margin expanded 12 bps to 24.2%, driven by Walmart U.S. Margin growth. The upside was backed by effective inventory management with reduced markdowns and a more profitable business mix, though partially impacted by unfavorable merchandise mix and international channel mix shifts.

Operating expenses deleveraged 6 bps, mainly due to higher Walmart U.S. depreciation, increased casualty claims and added VIZIO operating costs following the acquisition. In addition, deleverage at International and Sam’s Club U.S. reflects ongoing investments in associate wages, partially offset by the lapping of last year's business reorganization.

The company’s operating income increased 4.3% year over year to $7.1 billion, driven by solid sales growth, a greater gross margin and higher membership income, partly negated by expense deleverage. The metric also saw benefits from improved economics in e-commerce.

Decoding Walmart’s Segmental Show

Walmart U.S.: The segment’s net sales grew 3.2% year over year to $112.2 billion. Strong sales performance was driven by health & wellness and grocery categories, with continued market share gains in grocery and successful seasonal event execution. U.S. comp sales, excluding fuel, were up 4.5%, fueled by transaction growth of 1.6%, an average ticket increase of 2.8%, as well as strong e-commerce growth. E-commerce sales rose 21%, driven by strong performance in store-fulfilled pickup and delivery, marketplace growth and advertising. Expedited delivery options continue to attract convenience-focused customers.

As of the fiscal first quarter, Walmart U.S. is providing store-fulfilled delivery in under 3 hours to 93% of U.S. households. The company remodeled about 40 stores during the reported quarter. The operating income of the Walmart U.S. segment jumped 7% to $5.7 billion.

Walmart International: The segment’s net sales inched down 0.3% to $29.8 billion. Foreign currency fluctuations negatively impacted sales by $2.4 billion. On a cc basis, net sales jumped 7.8%, driven by strong performance in China, Flipkart and Walmex, supported by higher transaction counts and increased unit volumes. Sales strength continued across food and consumables, alongside growth in general merchandise.

E-commerce sales increased 20%, driven by strong growth in store-fulfilled pickup and delivery services and marketplace performance, with a higher digital sales mix across markets. The company’s membership income grew 22%. The operating income, on a cc basis, fell 6.4% to $1.4 billion.

Sam’s Club U.S.: The segment, which comprises membership warehouse clubs, witnessed a net sales increase of 5.5% to $19.7 billion (excluding fuel). Sam’s Club’s comp sales, excluding fuel, grew 6.7%. While transactions grew 4.8%, the average ticket climbed 1.7%. Sales growth was driven by strong performance in grocery and health & wellness, marking the fourth consecutive quarter of positive growth in general merchandise.

E-commerce net sales jumped 27% at Sam’s Club U.S. Membership income increased by 9.6%, supported by consistent growth in member count, strong renewal rates, and an increase in Plus membership enrollments. The segment’s operating income totaled $0.7 billion, up 11.5% year over year.

WMT Stock: Other Updates & Developments

The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $9.3 billion and total debt of $52.9 billion.

For first-quarter fiscal 2026, WMT generated an operating cash flow of $5.4 billion and a free cash flow of $0.4 billion. In fiscal 2026, capital expenditure is likely to account for 3-3.5% of net sales.

In the reported quarter, Walmart’s share repurchases amounted to $4.6 billion, representing 50.4 million shares. The remaining share repurchase authorization stands at $7.5 billion.

What to Expect From WMT in Fiscal 2026?

For the second quarter of fiscal 2026, WMT expects consolidated net sales growth of 3.5-4.5% (at cc). The guidance includes almost 20 bps benefit from the VIZIO acquisition.

For fiscal 2026, WMT continues to expect consolidated net sales growth of 3-4% (at cc). The adjusted operating income is expected to increase 3.5-5.5% at cc for the year. Net interest expenses are likely to escalate $100-$200 million. Walmart expects adjusted EPS for fiscal 2026 to be in the $2.50-$2.60 range. The company recorded an adjusted EPS of $2.51 in fiscal 2025.

WMT’s shares have dropped 6.9% in the past three months compared with the industry’s decline of 7%.

Key Picks

We have highlighted three better-ranked stocks, namely, Costco Wholesale Corporation COST, The TJX Companies TJX and Kontoor Brands, Inc. KTB.

Costco Wholesale, which is engaged in the operation of membership warehouses, currently carries a Zacks Rank #2 (Buy). COST delivered a trailing four-quarter earnings surprise of nearly 2%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Costco’s current financial year’s sales and earnings implies growth of 8% and 11.5%, respectively, from the year-ago reported numbers.

The TJX Companies, an off-price retailer, currently carries a Zacks Rank #2. The Zacks Consensus Estimate for TJX’s current financial-year sales and earnings suggests respective growth of 4.2% and 4% from the year-ago reported numbers.

The TJX Companies has a trailing four-quarter earnings surprise of around 5.5%, on average.

Kontoor Brands, a lifestyle apparel company that designs, produces, procures, markets, distributes and licenses denim, apparel, footwear and accessories, primarily under the Wrangler and Lee brands, currently carries a Zacks Rank #2. KTB delivered a trailing four-quarter average earnings surprise of 8.09%.

The Zacks Consensus Estimate for Kontoor Brands’ current financial year’s sales and earnings implies growth of 1.1% and 9.6%, respectively, from the year-ago reported numbers.

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This article originally published on Zacks Investment Research (zacks.com).

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