Retail giant Walmart (WMT 1.34%) released its fiscal 2025 first-quarter earnings on Thursday, May 16, reporting strong financial performance with notable revenue and operating income growth. Adjusted earnings per share (EPS) stood at $0.60, exceeding management's guidance for $0.49 to $0.52, and EPS was a 22.4% increase compared to the same quarter last year.
For the quarter that ended April 30, Walmart reported consolidated revenue of $161.5 billion which surpassed management's growth predictions. Consolidated operating income in Q1 was up 9.6% year over year, while adjusted operating income increased by 13.7%. Overall, Walmart had a strong quarter, outperforming on several key metrics.
| Metric | FY25 Q1 | Management Guidance | FY24 Q1 | Change (YOY) |
|---|---|---|---|---|
| Consolidated revenue | $161.5 billion | 4%-5% growth | $152.3 billion | 6% |
| Operating income | $6.84 billion | 3%-4.5% growth | $6.24 billion | 9.6% |
| Adjusted operating income | $7.1 billion | N/A | $6.24 billion | 13.7% |
| Adjusted EPS | $0.60 | $0.49-$0.52 | $0.49 | 22.4% |
Data provided by Walmart. Source: Management's guidance was provided in the Feb. 20, 2024, FY 2024 Q4 earnings report. YOY = year over year.
Understanding Walmart's business
Walmart operates more than 10,500 stores and numerous e-commerce websites across 19 countries. Known for its focus on low prices and broad product selection, the retailer's business model revolves around delivering value through an omnichannel shopping experience integrated with digital and in-store services.
Walmart is working to further enhance customer experiences and expand its digital and e-commerce capabilities. The company's key success factors include the integration of physical and digital commerce, cost control through its Everyday Low Prices (EDLP) and Everyday Low Cost (EDLC) strategies, and diversification of services including auto repair, pharmacy and optical services, financial services, and digital advertising through Walmart Connect.
Q1 highlights and performance
Walmart's e-commerce sales grew by 21% year over year in Q1, led by store-fulfilled pickup & delivery and its marketplace. CEO Doug McMillon pointed out in the company's release that e-commerce penetration is higher across all markets. Advertising revenue also saw strong growth -- 24% globally, with Walmart Connect in the U.S. up 26%, driven by digital integration strategies.
The U.S. segment's net sales rose by 4.6% to $108.7 billion, with comparable sales up 3.8%, reflecting strength in transaction counts and unit volumes. Internationally, net sales in constant currency increased by 10.7%, powered by strong performances in Mexico, Central America (Walmex), China, and Flipkart in India. Sam's Club U.S. also performed well, with net sales up 4.6% and comp sales excluding fuel increasing by 4.4%, driven by strong growth in food, consumables, and health & wellness segments.
Operational efficiency was evidenced by an improvement in the consolidated gross margin rate by 42 basis points due to effective pricing strategies and inventory management. "Gross profit rate increased 46 bps; membership income increased; operating expense deleveraged 48 bps," the company reported.
Walmart also noted some areas of concern. Legislative challenges posed by Senate Bill 1446 in California, aiming to reduce theft by banning self-checkout lanes, could impact operations. Walmart's operational strategies, strongly tied to its EDLC model, may suffer disruptions if the proposed legislation passes. Additionally, Walmart expressed caution regarding macroeconomic uncertainties, particularly noting mid-single-digit deflation in some general merchandise. Walmart also reiterated that it will close its U.S. healthcare clinics this summer due to profitability issues, affecting its diversification into health services.
Looking ahead
Looking forward, Walmart updated its fiscal year 2025 outlook, projecting it will reach the high-end or slightly above the original guidance for net sales growth of 3% to 4% and operating income growth of 4% to 6%. Continued investment in technology and innovation, such as supply chain automation and e-commerce integration, remains a key strategy for sustaining growth.
For the coming quarters, investors should keep an eye on Walmart's ability to maintain e-commerce momentum and manage legislative and theft-related challenges. The company's focus on digital integration and market adaptation in international segments will also be crucial for continued success.
