A Walmart in Atlanta, Georgia, on Sunday, February 19, 2023.
Dustin Rooms | Bloomberg | Getty Images
walmart raised its full-year forecast on Thursday as first-quarter sales rose nearly 8% and its large grocery business helped offset weaker sales in apparel and electronics.
Shares of the company rose about 1% on Thursday as the company beat Wall Street earnings and revenue expectations.
Walmart raised its outlook to reflect profit margin. It now said it expects consolidated net sales to grow about 3.5% in the fiscal year. It expects full-year adjusted earnings per share to be between $6.10 and $6.20, roughly in line with analyst expectations, Refinitiv said.
Chief Financial Officer John David Rainey said consumers are buying fewer discretionary items, waiting for promotions before making expensive purchases, such as TVs, and trading in for less expensive items, such as buying a smaller box of cereal.
Yet customers are still spending money, he added.
“We see in these economic indicators that the consumer is under some pressure, but the resilience has surprised us,” he told CNBC. “And I think that’s probably partly because balance sheets are much stronger than they were before the pandemic, even right now.”
Here’s what Walmart reported for the three-month period ended April 30, according to Refinitiv’s consensus estimates:
- Earnings per share: $1.47 adjusted versus $1.32 expected
- Revenue: $152.30 billion versus $148.76 billion expected
Walmart’s quarterly results were the most recent snapshot of US consumer health. Earlier this week, DIY store And Goal said customers bought less expensive and discretionary items because they paid more for essentials. For example, Home Depot customers choose smaller home projects over more expensive projects, and Target shoppers were more likely to skip home goods and clothing, contributing to declining category sales.
Walmart’s sales also reflected that shift to groceries and supplies, Rainey said. But unlike some competitors, as the country’s largest grocer, the chain of stores is well suited to that change.
Nearly 60% of annual sales in the US come from grocery products. In the quarter, US general merchandise sales fell mid-single digits, while food and consumer goods sales rose low double-digits, Rainey said during an investor call.
However, the mix weighed on the company’s Q1 gross margin, which declined year over year as food has smaller margins than other commodities.
Net income for the big-box retailer fell to $1.67 billion, or 62 cents per share, compared to $2.05 billion, or 74 cents per share, a year earlier.
Total revenue rose from $141.57 billion in the year-ago period to $152.30 billion, beating Wall Street expectations.
Because inflation plays a role in Americans’ spending decisions, the retail giant has attracted new and more frequent customers, including younger and wealthier customers, Rainey told investors on the call.
Same-store sales for Walmart US increased 7.4%, excluding fuel. The most important metric for the industry includes sales from stores and clubs that have been open for at least a year. At Sam’s Club, same-store sales increased 7% year over year excluding fuel, driven by grocery sales.
Online growth was one of the bright spots of the quarter for Walmart. E-commerce sales increased 27% year over year for Walmart US At Sam’s Club, e-commerce sales grew 19%.
The retailer deviated from Target, which saw digital sales fall 3.4% in the first quarter.
At Walmart, pick-up and home delivery of online purchases fueled growth, Rainey said during the investor call. He said customers have said in internal research that they turn to Walmart for both convenience and value.
Despite the revenue growth, Rainey said spending trends weakened as the quarter progressed, with the sharpest drop coming after February. He attributed that in part to the end of pandemic-related emergency funding from the Supplemental Nutrition Assistance Program and a decline in tax refunds.
Speaking to investors, CEO Doug McMillon said persistently higher prices for everyday items like food and stationery continue to squeeze families’ budgets month after month, leaving less money to spend in other ways.
He said persistent inflation is “one of the main factors creating uncertainty for us in the second half of the year.”
Walmart said for the fiscal second quarter that it expects consolidated net sales to grow about 4% and adjusted earnings per share to range between $1.63 and $1.68. That’s lower than the $1.71 per share Wall Street expected, according to Refinitiv’s consensus estimates.
Shares of Walmart closed at $149.53 on Wednesday, bringing its market value to $403.33 billion. The stock is up nearly 6% year-to-date. The stock lagged the S&P 500 gains by about 8%, but is ahead of retail-focused XRT’s nearly 2% gain over the same period.
Correction: Shares of Walmart have lagged the S&P 500’s gains by about 8%, but are ahead of the nearly 2% rise in retail-focused XRT over the same period. An earlier version misrepresented their status.