Earnings and revenue at Walmart Inc. (WMT) grew at a strong pace throughout much of the COVID-19 pandemic as consumers shifted to e-commerce and making more purchases for the home. But these trends are shifting as shoppers return to in-person stores and experiences. The shifting dynamics could mean trouble for Walmart, as the retail giant has had to lower prices to move products that have piled up in stores. The company also recently announced layoffs and a restructuring of its headquarters operations.

Investors will watch to see how these factors have affected Walmart’s performance when it reports earnings for Q2 FY 2023 on Aug. 16, 2022. Walmart’s 2022 fiscal year (FY) ended Jan. 31, 2022. Analysts predict that adjusted earnings per share (EPS) will decline for a second straight quarter as revenue growth accelerates to its fastest pace in a year and a half.

Investors also will look at Walmart’s U.S. comparable sales growth, excluding fuel. This metric measures the rate of growth generated by the company’s existing stores and clubs in the U.S. as well as e-commerce sales. Comparable sales growth is predicted to increase on both a YOY and a sequential basis.

Walmart shares have performed erratically in the last year. Although the stock was ahead of the broader market in mid-August 2021, it declined through early October and failed to maintain a recovery for many months to follow. Walmart stock rallied in March and April 2022, once again outpacing the market. But shares fell into early May and dropped precipitously following the most recent quarterly report that month. The stock has recovered somewhat since that time but is still struggling to maintain gains. As of Aug. 14, Walmart shares have provided a 1-year trailing total return of -9.9%, behind the S&P 500’s return of -4.1%.

Walmart Earnings History

In FY 2020, Walmart’s last fiscal year before the start of the COVID-19 pandemic, the company’s adjusted EPS declined in three out of four quarters. This performance sharply reversed in FY 2021, as quarterly growth accelerated to as high as 23.3% in Q2. FY 2022 was even stronger, with YOY improvement in adjusted EPS of 42.7% in Q1 of that year. Since that high point, though, adjusted EPS growth cooled. It dropped to 8.0% by Q3 FY 2021 and declined YOY for the first time in over two years for Q1 FY 2023. Analysts now predict a second consecutive quarter of adjusted EPS declines YOY, although at a slower pace than last quarter.

Walmart has maintained revenue growth each of at least the past 14 quarters. For FY 2018, 2019, and 2020, annual revenue growth ranged from 1.9% to 3.0%. It accelerated sharply in FY 2021 as annual growth reached 6.7% YOY. Growth slowed again in FY 2022 and has not topped 4.3% in the past five quarters. Now, analysts expect Walmart to post revenue gains of 6.8% YOY, the strongest performance in a year and a half.

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The Key Metric

As mentioned, investors also will be watching another key metric, Walmart’s U.S. comparable sales growth. Comparable sales, also referred to as same-store sales in the retail industry, measures the sales performance of the company’s stores and clubs that have been open during the previous 12 months. The metric includes sales from Walmart’s remodels, relocations, expansions, and conversions, as well as e-commerce sales.

Comparable sales growth gauges a company’s ability to generate additional revenue from established stores. If the bulk of a company’s sales are being generated by established stores as opposed to new ones, this is a good sign that the company’s products have not yet saturated the local market. Note that Walmart does not report international comparable sales growth, and the U.S. comparable sales figures include Walmart, Sam’s Club, and associated e-commerce within the U.S. for both brands. They do not include fuel sales because of the volatility of gas prices.

Walmart’s U.S. comparable sales growth, excluding fuel, ranged from 1.8-2.9% each quarter of FY 2020 before sharply accelerating in FY 2021. It reached as high as 10.3% YOY in Q1 FY 2021 but has dropped since that time. Q2 FY 2021 fell to 9.9% YOY, then to 5.5% YOY for Q2 FY 2022. Last quarter, U.S. comparable sales growth was 4.0%, the lowest this figure has been since before FY 2021. Consensus estimates suggest that U.S. comparable sales growth may accelerate once again, but not to the highs of FY 2021. Walmart is predicted to post comparable sales growth for the U.S. of 6.4% YOY for Q2 FY 2023.