Walmart Inc (NYSE:WMT, XETRA:WMT) had its price target lowered by UBS to $141 from $147 following the company’s first-quarter results, while the broker said its longer-term view remains intact on Walmart’s “second P&L,” a term it uses to describe faster-growing, higher-margin revenue streams outside core retail, such as advertising, marketplace fees and membership income.
Shares of Walmart closed out Friday’s session at about $120, up about 8% so far this year.
The firm wrote in a note that expectations heading into the quarter had risen as investors positioned more heavily in Walmart amid a challenging consumer backdrop. While results came in below those elevated expectations, UBS pointed to underlying trends that it said continue to support the company’s growth narrative, particularly in e-commerce and its expanding digital businesses.
Walmart reported adjusted earnings per share of $0.66, in line with consensus estimates. US comparable sales rose 4.1%, supported by a 3% increase in transactions and a 1.1% rise in ticket, with e-commerce contributing 530 basis points to the comp.
UBS highlighted continued momentum in Walmart’s digital operations, with global e-commerce growth of 26% year over year. The firm also noted accelerating performance in alternative revenue streams, including a 50% increase in marketplace sales and 37% growth in global advertising, alongside roughly 17% growth in membership revenue.
The report said Walmart continued to expand gross margins in the US, up around 30 basis points in the quarter, even after absorbing an estimated $175 million in incremental fuel costs. UBS believes that the result suggested improving contributions from higher-margin businesses such as advertising, marketplace, and membership services.
The firm also pointed to Walmart’s ongoing investments in faster delivery and logistics, noting that the company now reaches about 60% of the US population with delivery times of 30 minutes or less. E-commerce growth, it said, remained relatively consistent across geographies, including 26% growth in the US, 27% internationally, and 23% at Sam’s Club.
On the consumer backdrop, UBS said higher-income households continued to show resilience, while lower-income consumers remained under pressure from elevated fuel costs. It added that Walmart’s strategy of maintaining lower prices appeared to support market share gains, reflected in continued traffic growth.
Looking ahead, Walmart reiterated its financial guidance, including 3.5% to 4.5% net sales growth and 6% to 8% operating income growth in constant currency. UBS expects the contribution from Walmart’s alternative revenue streams to increasingly offset external cost pressures over time.
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