Walmart Inc lifts annual sales, profit view on resilient consumer spending
Wal-Mart Inc raised its annual sales and profit targets on Thursday as shoppers sought deals on essentials like groceries.
Shares of the largest US retailer by sales rose about 1.5% in pre-market trading after it also reported better-than-expected first-quarter results.
Wal-Mart has kept grocery prices low to fend off competition from Target Corp and Kroger, as Americans continue to struggle to pay high prices for food.
While prices for food eaten at home fell for the second consecutive month in April, they were still up 7.1% over a year ago, data from the Commerce Department showed last week.
With Walmart accounting for $1 in every $4 spent on groceries in the US, it’s in a sweet spot.
Sales at Walmart’s U.S. stores open for at least a year rose 7.4%, excluding fuel, in the first quarter ended April 30, handily beating expectations for a 5.25% increase.
“We see continued trade-offs, certainly as consumers focus on lower-priced proteins or lower package sizes, but we also see the proliferation of private labels continue to pay us well in the quarter,” Chief Financial Officer John David Rennie told Reuters. .
“As consumers have less purchasing power, less purchasing power, we see more of their income, their wallets going towards food, and less towards general merchandise.” Similar grocery sales in the United States grew by low double digits in the quarter, the company said, helped by strong demand for food and increased purchases from wealthier households.
The company has also seen a rise in demand for health and wellness products.
People also shop more online, which has helped Wal-Mart in the US
E-commerce sales grew 27% in the quarter. By contrast, Target digital comparable sales fell 3.4% in its most recent quarter.
On a post-earnings conference call with analysts, CEO Doug McMillon said he remains “uncertain” about the back half of the year as inflation remained “stubborn” in dry groceries and items intended for immediate consumption.
However, Wal-Mart’s strong results contrasted starkly with Target and Home Depot’s bleak forecasts, which they blamed on weak consumer demand. Wal-Mart expected second quarter results higher than expectations.
“Wal-Mart’s strong quarter underscores the view that the large retail company … is better suited to the current economic climate than some of its industry peers, such as Home Depot and Target,” said Jesse Cohen, senior analyst at Investing.com.
“Walmart has weathered the current operating climate better than most of its peers.”
Walmart now expects earnings per share for the full year in the range of $6.10 to $6.20, compared to a previous forecast of $5.90 to $6.05. Analysts estimated a profit of $6.16 per share, according to Refinitiv data.
The company also expected net sales to rise by about 3.5%, above its previous forecast of 2.5% to 3%.
Operating income increased 17.3% in the first quarter, in part due to increased contributions from the advertising, delivery and fulfillment services business. Wal-Mart’s adjusted earnings per share came in better than expected at $1.47 a share.
Net revenue rose 7.6% to $152.30 billion in the first quarter, beating estimates of $148.76 billion.