A cart in the parking lot of a Walmart store in Miami, Fla., on May 14.Joe Raedle/Getty Images
Walmart Inc. WMT-N raised its full-year forecast and reported better-than-expected quarterly results on Thursday, betting that easing inflation will drive stronger sales of groceries and non-essential merchandise like clothing and electronics, sending its shares to a record high in their biggest one-day gain in four years.
Some U.S. retailers in recent weeks have fanned concerns that consumer spending is waning, but behemoth Walmart is not one of them.
The largest U.S. retailer sounded uniformly positive in its outlook Thursday – sending shares up 7 per cent to an all-time high of US$64.22. The rally was the sharpest single-day gain for Walmart’s stock since March, 2020, and it helped lift the Dow industrials past 40,000 for the first time.
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 per cent, according to Bureau of Labour Statistics data released on Wednesday, though far below the 9.1-per-cent pace hit in June, 2022.
“These are not inflation-driven results,” Walmart chief executive officer Doug McMillon said on a post-earnings call.
Results were driven by more visits to stores and the website by wealthier shoppers and the price gaps it is maintaining against rivals, Mr. McMillon said.
In Thursday’s report, Walmart said total U.S. comparable sales rose 3.9 per cent, 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 per cent, according to LSEG.
Online sales in the United States surged 22 per cent, surpassing the 17-per-cent growth Walmart posted during the typically robust holiday season.
Growth was driven by Walmart’s pickup and delivery services and increased sales of items such as men’s, women’s and children’s 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 US$100,000 per year.
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 executives said that lower-income consumers maintained their spending habits in the quarter but tended to prioritize less-expensive items. They also noted that the price gap between eating at home and dining out had increased, boosting its grocery business, which accounts for about 60 per cent of total revenues.
A 45-per-cent 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 favourably, resulting in sustained sales growth and higher gross margins,” Walmart’s finance chief John David Rainey said.
Gross margins rose about 0.4 per cent, helped by newer business such as advertising and Walmart+ membership, Mr. Rainey said.
Telsey Advisory analyst Joseph Feldman said Walmart’s strong results could bode poorly for the rest of retail as its performance indicates it is taking market share. Target Corp. reports results on May 22.
The retailer reported first-quarter adjusted earnings of 60 cents US per share, easily beating the 52-cent US average forecast. Total revenue of US$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-per-cent to 4-per-cent growth, and adjusted profit a share to be at the high end or slightly above its prior estimate of US$2.23 to US$2.37.