Walmart lifts annual forecast, announces $20-B share buyback

WALMART, Inc. on Tuesday lifted its annual sales and profit forecast as demand for groceries holds up despite higher prices, while discounts on clothing and electronics helped it cut back excess inventories ahead of the busy holiday season.

The company also announced a new $20-billion share buyback plan, sending its shares as much as up 7% in morning trading to a six-month high of $148.40.

Its results boosted stocks of other major retailers, including Target Corp., Costco and Macy,’s, Inc. Target reports results on Wednesday.

Amid persistent inflation, investors have been nervously eyeing how consumer spending pans out during the crucial holiday season, when retailers make more than a third of their annual profits.

“In this period of macroeconomic uncertainty... we are well equipped to continue gaining market share in an environment where consumers need to stretch their dollars further,” Chief Financial Officer (CFO) John David Rainey said on an investor call.

The world’s largest retailer by sales forecast holiday quarter US same-store sales, excluding fuel, to increase about 3%, below estimates of a 3.4% increase.

Mr. Rainey said the guidance assumes a more promotional holiday period and that consumers could slow spending, especially in general merchandise categories, due to continued rising costs for food.

The company’s comments follow those of FedEx and Amazon, which have also warned of muted holiday season demand in recent weeks. Home improvement chain Home Depot on Tuesday left its annual forecasts unchanged, adding to holiday season concerns amid a slowing housing market.

For the full-year, Walmart forecast net sales to rise 5.5%, above its previous forecast of a 4.5% increase.

Walmart also said it was better prepared on the inventory front with many of the challenges it faced earlier this year “cleared out.” The company’s inventories were up 13% at $65 billion on a value basis, which CFO Rainey said was 70% inflation driven, but on a unit basis was “much lower.”

Walmart’s strong results prove its operational model excels during times of economic strength ... Walmart is a counter-recessionary retailer,” Guru Hariharan, founder and CEO of retail ecommerce management firm CommerceIQ said.

While US consumer prices rose less than expected in October, a recent survey shows that consumer sentiment slumped in November and inflation expectations had edged up. —