Walmart raised its full-year forecast betting that easing inflation will drive stronger sales of groceries and non-essential merchandise like clothing and electronics. Walmart profit news saw a rise in its share price today to a record high in their biggest one-day gain in 4 years.
Walmart Inc. breezed to another quarter after the results which showed sales growth and said it now expects the full year to be slightly better than planned as the big-box retailer attracts consumers looking for essentials and discounts.
U.S. consumer prices rose
There has been concerns placed by some U.S. retailers in recent weeks that consumer spending is waning, but Walmart is not one of them.
Overall, U.S. consumer prices rose less than expected in April, but domestic demand has shown signs of cooling as Americans struggle with higher rents, gas prices and car insurance premiums. In the 12 months through April, the consumer price index was up 3.4%, according to Bureau of Labor Statistics data released on Wednesday, though far below the 9.1% pace hit in June 2022.
“These are not inflation-driven results,” Walmart CEO Doug McMillon said on a post-earnings call.
Quarterly results were driven by more visits to stores and the website by wealthier shoppers and the price gaps it is maintaining against rivals, McMillon said.
Walmart’s sales
In it’s quarterly result on Thursday, Walmart said total U.S. comparable sales rose 3.9%, excluding fuel, in its first quarter ended April 30. The average bill at the cash register was flat but the number of transactions rose. Analysts expected those sales to rise 3.15%, according to LSEG.
Online sales in the U.S. surged 22%, surpassing the 17% growth Walmart posted during the typically robust holiday season.
Walmart’s growth
Growth was driven by Walmart’s pickup & delivery services and increased sales of apparel through its third-party marketplace, which now offers more than 420 million items of mostly discretionary products. Walmart attributed much of the online gains to households earning more than $100,000 per year.
Boost in grocery business
As per Walmart executives lower-income consumers maintained their spending habits but tended to prioritize less expensive items. Also the price gap between eating at home and dining outside had increased, boosting its grocery business, which accounts for about 60% of total revenues.
A 45% increase in the number of food and consumables items it offered on discounts, which it calls rollbacks, in April resonated strongly with shoppers.
“As we continue to work closely with our suppliers to lower cost, we’re managing our … competitive price gaps and customers are responding favorably, resulting in sustained sales growth and higher gross margins,” Walmart’s finance chief John David Rainey said.
Gross margins rose about 0.4%, helped by newer business such as advertising and Walmart+ membership, Rainey said.
Walmart sales forecast
Walmart reported Q1 adjusted earnings of 60 cents per share, easily beating the 52-cent average forecast. Total revenue of $161.51 billion also topped estimates.
For its fiscal year ending January 2025, Walmart expects sales to rise at the high end or slightly above its prior forecast of 3% to 4% growth, and adjusted profit per share to be at the high end or slightly above its prior estimate of $2.23 to $2.37.
While Americans have generally managed to navigate through higher prices, prolonged inflation has sparked worries that lower-income consumers might be more pressured and potentially slow down an anticipated recovery in spending.
Walmart share price
The largest U.S. retailer sounded uniformly positive in its outlook on Thursday, which rose its share by 7% to an all-time high price of $64.22. The rally was the sharpest single-day gain for Walmart’s stock since March 2020. This Walmart share price rally today helped lift the Dow industrials past 40,000 for the first time.
