Walmart raises full-year earnings forecast as grocery, online growth fuel higher sales


Walmart on Thursday raised its full-year forecast, as the discounter leaned on its low-price reputation to draw grocery customers and drive online spending.

The big-box retailer beat Wall Street’s expectations for sales and profits. Walmart U.S.’s e-commerce sales also jumped by 24%. The company said that adjusted earnings per share will be between $6.36 to $6.46. In an interview with CNBC, Walmart’s Chief Financial Officer John David Rainey stated that the company saw a “modest increase” in sales for big-ticket items and discretionary products like electronics and home furnishings during the third quarter. The sales of these products have been declining for over a year, as Americans are spending more on food and other necessities. He described consumers as “discerning or choiceful.” He said seasonal moments, such as the Fourth of July holiday and back-to-school, have helped drive sales.

The company’s shares closed more than 2% lower on Thursday.

Here’s what the company reported for the three-month period ended July 31 compared with what analysts were expecting, according to consensus estimates from Refinitiv:

Earnings per share: $1.84 adjusted vs. $1.71 expected

Revenue: $161.63 billion vs. $160.27 billion expected

Walmart’s net income for the fiscal second-quarter jumped by 53% to $7.89 billion, or $2.92 per share, compared with $5.15 billion, or $1.88 per share a year earlier. Customers visited Walmart stores and websites more frequently and purchased more. Transactions increased by 2.9% and the average ticket rose by 3.4% for Walmart U.S.

  • Same-store sales for Walmart U.S. grew by 6.4% in the second quarter, excluding fuel, compared with the year-ago period. That’s higher than the 4.1% increase that analysts expected, according to FactSet.
  • At Sam’s Club, same-store sales rose 5.5%, excluding fuel, in line with analysts’ expectations.

Walmart’s online sales in the U.S. grew, as customers bought more items from the company’s growing third-party marketplace and placed more orders for store pickup and delivery.

“It really shows that the value proposition for Walmart is much, more than just low prices or value. Rainey stated that convenience is the key today. “We’re heavily leaning into this and really both aspects in our business. “

Walmart has gained momentum with new revenue streams, too, including selling more advertisements and convincing more shoppers to sign up for its membership program, Walmart+.

Those higher margin businesses are a major reason why CEO Doug McMillon has said he expects profits to grow faster than sales over the next five years.

That upward trajectory continued in the most recent quarter. Walmart Connect’s U.S. advertising sales grew by 36% in one year. Walmart announced on Wednesday that Judith McKenna will retire from her position as Walmart International CEO in mid-September. McKenna has been with the company for 27 years. Sam’s Club’s CEO Kath McLay is set to take over her position. Chris Nicholas, the current chief operating officer of Walmart U.S., will become the new CEO of Sam’s Club.

Winning over frugal customers

Walmart has stood apart from other retailers such as Target

, which have struggled with softer sales.

It is better insulated from shoppers’ changing tastes and reactions to economic factors like high inflation because it sells more everyday staples as the nation’s largest grocer.

Rainey said he continues to be surprised by consumers and their “willingness to spend.” But he added they still want to to save money.

Customers are buying more food from Walmart’s private brands, which typically cost less. Private label sales at Walmart U.S. have increased 9% in the past year. Those brands make up 20% of Walmart’s total U.S. sales.Shoppers may also be looking to save by making more of their own meals rather than dining out. Rainey noted that Walmart had noticed “a slight shift” in the way people cook at home. It saw an uptick in sales of prepared meals and tools to cook with, such as blenders and mixers.While general merchandise trends are improving, sales are still down by low single digits year over year, he said. Walmart’s limited-time sales, called Rollbacks, have been especially popular. Walmart U.S. Chief Executive John Furner stated on an earnings conference call that they saw a boost in sales by offering items such as backpacks and chips for a discounted price. It has had a higher number of Rollbacks in food than a year ago, he added.

Cooling inflation, more optimism

Walmart has seen inflation ease while other other challenges persist.

In the year-ago period, Walmart and other retailers were trying to clear excess unsold merchandise. This led to higher inventories and steeper discounts. Rainey stated that food prices are stable, but the prices of general merchandise have decreased compared to last year. Some staple grocery items, however, have fallen.

Shoppers are buying more fresh meats, seafood and eggs as they’ve become more affordable, Rainey said.

Back-to-school, one of the biggest seasons for retailers, has gotten off to an early and strong start, CEO Doug McMillon said. These sales trends are indicative of patterns that will be seen in the months to come, and they should bode well for general merchandise sales, Halloween and the holidays, said McMillon. He said consumers face newer pressures, such as the return of student loan payments that had been paused for more than three years because of the Covid pandemic.

“While inflation is moderated and employment levels have been steady, credit markets have tightened,” he said. Energy prices are up and some customers will face extra expenses due to the return of student loan payments that were paused for more than three years because of the Covid pandemic. We continue to remain realistic in our forecast. “

Correction – Walmart’s net profit for the second quarter of fiscal 2010 increased by 53% compared to a year ago. The percentage was incorrect in an earlier version. Prior guidance from the company was for a range of adjusted earnings per share between $6.10 to $6.20. The guidance was misrepresented in an earlier version.