Walmart raises guidance after first quarter top expectations

Walmart reported better-than-expected earnings in the three months through the end of April, allowing it to raise its full-year estimates and undercut a more cautious tone about US consumer spending set this week by rivals Home Depot and Target. Got it.

“Stubborn inflation” in dry groceries and consumables was still weighing on some households and creating uncertainty about the outlook for the second half of the year, Walmart Chief Executive Doug McMillan told analysts on an earnings call. told.

Group chief financial officer John David Rainey said food prices remained more than 20 percent above two-year-ago levels, despite a 4 percent fall in headline inflation in food and consumables during the quarter.

“Consumer spending at the headline level has proven resilient, but below the surface we continue to see signs that consumers are particularly picky in the discretionary categories,” Rainey said.

But Walmart delivered a more bullish accounting of growth in the quarter and its prospects for the rest of the year than its rivals.

The world’s largest retailer upped its full-year forecasts, predicting 3.5 percent sales growth instead of 2.5 to 3 percent guidance last month. It now expects adjusted earnings to reach $6.10 to $6.20 per share, up from the $5.90 to $6.05 range it previously flagged.

Revenue rose 7.7 percent to $152 billion for its fiscal first quarter, with a 26 percent increase in e-commerce sales. A cut in operating expenses helped offset the expense shift from more profitable general merchandise items, boosting adjusted earnings per share 13 percent to $1.47, well above the $1.25 to $1.30 range that investors had expected. It was

Rainey said Walmart’s US general merchandise sales were down by a mid-single digit percentage in the quarter, while food and consumables sales saw “low double-digit” growth.

Walmart continued to gain market share in grocery, including among higher-income consumers who have become more price-conscious as inflation persists. Inexpensive private-label brands also claimed a large share of its US sales in the quarter.

Corey Tarlow, a retail analyst at Jefferies, said Walmart saw growth in both the number of consumers coming into its stores and the average amount they spent, which was “very encouraging”.

Tarlowe said its more confident outlook than a target suggests it could capture market share at a time when US consumers were becoming “more and more stretched”. “People are buying more on credit, they’re saving less and they’re going to stores like Walmart more.”

Outside its home market, Walmart pointed to a 28 percent increase in sales from its stores in China as the country eased Covid-related restrictions. It reported double-digit sales growth from its Valmex business in Mexico and Flipkart, its e-commerce business in India, where Macmillan said it saw “a huge opportunity” to grow exports of several categories of goods.

Shares of Walmart were up 2.1 percent shortly after the opening of Wall Street on Thursday.