Walmart’s big quarter sign of consumer health
— Walmart offered NEW YORK a dose of optimism amid growing concerns over weakening economic growth by raising its annual outlook after a strong second quarter.
Sales at stores opened at least a year rose 2.8%, its 20th consecutive quarter in the right direction as the world’s largest retailer continues to expand its grocery delivery services. U.S. online sales increased 37%.
Walmart’s chief financial officer Brett Biggs told reporters on a call that the consumers’ financial health remains “solid.”
The encouraging news from Walmart, considered a barometer of consumer health, came on the same day the government released a report that showed Americans had spent more at retail stores and restaurants in July. Retail sales rose a healthy 0.7% last month after a 0.3 % gain in June, the Commerce Department said.
The pair of reports eased fears over a weakening economy and a persistent trade war with China that have roiled financial markets but have yet to weaken consumer confidence. Steady job growth and modest increases in wages have helped to prop up spending.
Walmart and other major retailers have been left largely unscathed by the first several rounds of tariffs since they focused more on industrial and agricultural products. That is changing and retailers are bracing for a 10% tariff targeting goods like toys, clothing and shoes. The tariff has been delayed until December after the Trump administration voiced concern about the impact on consumers and businesses during the holiday season.
Being forced to raise prices, or eat additional costs because of new tariffs, is becoming a significant threat for Walmart and everyone else with indicators flashing warnings signs of a coming recession
But Walmart’s latest earnings report shows it has been able to keep prices low even as its costs are rising and it’s pushing its online operations aggressively to counter Amazon.com. For example, the discounter offered limited free next day delivery in May with an order of at least $35 and plans to expand that service nationwide this year.
During a call with reporters Thursday, Biggs said that it has an advantage over other retailers because it can spread price increase across a wide breadth of items. It says it’s considering increases on an item by item basis.
Other retailers haven’t been so lucky. Macy’s on Wednesday said that its customers are balking at paying more after the company hiked prices on some goods like furniture to offset a 25% tariff implemented on them in May. Shares of Macy’s plunged 13% after it cut its outlook for the year.
Neil Saunders, managing director of GlobalData Retail, says Walmart has “plenty of firepower for any battles that may lie ahead.”
“At present there is just no evidence of a material downturn,” he wrote in a report. “In our view, it remains the case that performance remains largely the responsibility of the strategies of individual retailers and cannot be blamed on external circumstances.”
Walmart reported quarterly profit of $3.61 billion, or $1.26 per share, after reporting a loss in the same period a year earlier.