US retail giant Walmart breezed to another quarter of 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.
Sales rose 3.8 per cent at US Walmart stores open at least a year for the quarter ended April 26th, higher than what Wall Street was anticipating. With inflation easing, the average ticket was flat but the number of transactions rose by 3.8 per cent from a year ago.
Ecommerce was a big driver, jumping 22 per cent during the same period, as well as upper-income households that the retailer said drove the bulk of its gains.
Walmart now expects adjusted earnings to come in at the high end or slightly above its original guidance of $2.23 (€2.05) to $2.37 per share and revenue growth of 3 to 4 per cent for the full year. Analysts are expecting adjusted earnings of $2.37 per share and a revenue increase of nearly 4 per cent for the full year.
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“These are not inflation-driven results,” chief executive Doug McMillon said on a call with analysts. Increases in units, transaction and market share contributed to stronger performance, he said, adding that the company is pushing forward more discounts that are resonating with a higher number of customers increasingly looking for value.
The shares jumped by 6 per cent at 8.45am in New York trading. The stock had gained 14 per cent so far this year through Wednesday’s close, outpacing the 11 per cent rise in the S&P 500 Index.
“We are seeing customers trade into Walmart,” chief financial officer John David Rainey said in an interview on Thursday, noting that higher-income households were the largest cohort behind share gains in nearly every category.
Mr Rainey said the company is driving costs out of its ecommerce business while increasing delivery orders, which recently surpassed its pickup orders. The company shipped about 4.4 billion units for same-day or next-day delivery over the past 12 months, with about 44 per cent of those orders delivered to customers in less than four hours. By comparison, Amazon.com said last month that it shipped more than 4 billion items to Prime members via same or next-day deliveries in 2023.
“We’ve historically been thought of for value, but now it’s value, quality and convenience,” Mr Rainey said.
The grocery business continues to fuel Walmart’s growth, as general merchandise has lagged. Consumer sentiment dropped in early May to a six-month low due to concerns about inflation and the job market, while retail sales stagnated in April. Still, a measure of underlying inflation cooled in April for the first time in months, boding well for Federal Reserve officials looking to start cutting rates this year.
Consumers that are prioritising staples over larger, discretionary purchases has dented sales of competitors such as Home Depot and Target. But as higher-income consumers trade down or search for deals, Walmart is benefiting from a decision to roll out more discounts and new products and revamp stores. The company said it is on track to remodel more than 900 stores this year.
Lower-income consumers are buying in similar patterns at Walmart, purchasing more groceries and other necessities than general merchandise.
“Consumer pocketbooks are stretched,” Mr Rainey said, noting that customers are spending more of their paychecks on essential categories like food and beauty and less on higher-margin general merchandise.
Earlier this week, Walmart announced plans to shutter smaller offices and lay off hundreds of employees who are still working from home or cannot move to bigger office hubs. Most relocations will be to the retail giant’s corporate headquarters in Bentonville, Arkansas, where Walmart is building a 140-hectare (350-acre) campus. – Bloomberg
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