Skip to Content
Stock Analyst Update

Walmart Starts Off Fiscal 2022 Better Than We Expected

We suggest investors await a more attractive entry point.

Mentioned:

Despite increasingly difficult comparisons, wide-moat Walmart (WMT) saw strong fiscal 2022 first-quarter performance, with 3% revenue expansion spurred by growth in all channels and rising general merchandise sales. This should lead us to lift our near-term targets and our $124 fair value estimate by a mid-single-digit percentage. We attribute the results to transitory pandemic-related volatility and still expect low-single-digit sales growth and 4%-5% adjusted operating margins long-term. We suggest investors await a more attractive entry point, considering near-term volatility and intensifying competition.

Each of Walmart’s divisions saw good results, with the namesake U.S. unit posting 6% comparable sales growth (excluding fuel), international seeing a similar total revenue uptick (excluding divestitures), and Sam’s Club up 7% on a comparable basis (excluding fuel). With Walmart lapping customer stock-ups in the early days of the pandemic, we had been more pessimistic, expecting roughly flat, low-single-digit, and flat growth, respectively. Stimulus played a role, particularly in the U.S., where we were encouraged by Walmart’s general merchandise strength (low 20s growth). Along with strong sales and falling pandemic-related costs, the mix shift toward those items drove more than 110 basis points of consolidated operating margin improvement to 5%; we expected closer to 4%. Given year-to-date results, management now expects fiscal 2022 adjusted diluted EPS to rise by a high-single-digit percentage (slight decline previously); our prior estimate (3% dip) should rise similarly.

Consolidated e-commerce sales rose 37%, with continued strength in grocery and other categories. Digital sales should ease as the year goes on and store traffic rises, but we still expect Walmart’s omnichannel investments to deliver long-term benefits, with e-commerce sales accounting for about a third of the namesake U.S. unit’s sales by fiscal 2026 (from 12% in fiscal 2021).

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Zain Akbari does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.