Walmart Inc. (NASDAQ:WMT)’s shares closed higher between September 11th and September 14th. On the 11th, before market open, grocery firm The Kroger Co. (NYSE:KR) had reported its second quarter earnings, following which the stock closed 2.7% higher. Cramer has discussed Walmart Inc. (NASDAQ:WMT) several times over the past couple of months. In particular, the CNBC TV host wasn’t impressed by the firm’s latest earnings and advised letting go of the shares due to a high valuation. In his morning appearance on the 15th, Cramer discussed Walmart Inc. in the context of negative earnings:
“So it was interesting that Walmart stock went up yesterday and Kroger stock did not react to the negative earnings. As if, somehow, they are going to be able to get a little bit more of a margin.”
On the topic of earnings, The Kroger Co. (NYSE:KR)’s second quarter results saw the firm cut its full-year identical sales growth guide to 0.2% and 0.8% from an earlier 1% to 2%. The firm’s identical sales growth also dropped significantly in the second quarter, as it sat at 0.2% compared to 3.4% in the year-ago quarter. The figure also missed analyst estimates of 0.9%.
The weakness pointed towards the potential impact of lighter consumer spending in an inflationary environment, with reports suggesting that while consumers are making more store trips, they are reducing discretionary spending and overall basket size. The higher costs also appeared to affect The Kroger Co.’s operating margin, which remained flat annually at 2.8%. However, on the positive side, particularly when it comes to margins, the firm’s high margin marketing business, KPM, grew its profit by 24% annually to provide the firm with much needed margin pressure relief.
On the other hand, Walmart Inc.’s second quarter saw the firm grow comparable sales at 2.6%, which was much faster than Kroger’s growth. Yet, even this growth was the slowest in nearly five years, and it missed analyst estimates of 3.7%. Management was also upfront about the impact of higher fuel prices and outlined that it expected a $10 billion cost headwind from the higher prices in fiscal year 2027. Yet, just like Kroger, Walmart Inc.’s advertising revenue growth was strong. The business grew revenue by 38% with initiatives such as Walmart Connect growing by 43%.
Looking at the valuation, Walmart Inc.’s forward P/E ratio of 37 is significantly higher than Kroger’s 11.96. Considering the difference, it’s unsurprising that Cramer had remarked on August 24th that: “I guess you have to let go of your Walmart unless you think you have a plan.” As for the short interest, 1.9% of Walmart Inc.’s float is short, while the figure is higher at 4.69% for Kroger. Hedge fund interest, at 111 funds in Q2, is significantly higher for the former compared to 56 for the latter.
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