Walmart surges on boost to profit outlook from bargain seekers
Walmart jumped the most in two years as U.S. shoppers flocked to its stores to find discounts amid surging inflation, spurring surprisingly robust third-quarter results and an improved annual profit outlook.
The world’s largest retailer also reported progress in reining in bloated inventories and unveiled a new $20 billion program to buy back its stock. On top of that, Walmart is deepening inroads with wealthier customers as they hunt for bargains, Chief Executive Officer Doug McMillon told Wall Street analysts in a conference call Tuesday.
The results, labeled a “grand slam” by Citigroup, underscored Walmart’s progress in righting the ship after unwanted apparel and home goods piled up earlier this year and hammered profit by prompting price cuts. While Walmart took a wait-and-see tone in its expectations for the holiday shopping season, its outlook soothed fears of another nasty surprise.
Walmart’s inventory position “may translate to less risk from post-holiday markdowns,” said Jennifer Bartashus, an analyst at Bloomberg Intelligence. “We believe the company is capturing a greater share of spending from shoppers seeking value.”
Walmart soared 7.2% to $148.40 at 11:48 a.m. in New
York. Earlier, the stock rose as much as 8.6% for the biggest intraday gain since March 2020. The surge erased the shares’ year-todate decline.
Adjusted earnings of $1.50 a share surpassed the average analyst estimates of $1.32 for the third quarter, which ended in late October. In a statement, Walmart issued an improved profit forecast for the year, saying adjusted earnings would decline no more than 7%, compared with previous guidance for a drop of as much as 11%.
Cost controls and market-share gains in grocery propelled the better-thanexpected results, Chief Financial Officer John David Rainey said on the call. Comparable sales in the U.S. climbed 8.2%, excluding fuel, propelled not just by higher prices but by a 2.1% increase in transactions - twice the gain in the second quarter.
Comparable sales in grocery posted a percentage gain in the mid-teens, and unit volumes in food rose after a slight decline last quarter. Almost threequarters of Walmart’s market-share gains in grocery came from shoppers with household incomes over $100,000, extending a trend that the company flagged in the summer.
Walmart is expanding its share of shoppers “in every income bracket,” demonstrating that everyone is looking to lower costs, even if it’s on everyday items, said Neil Saunders, managing director at GlobalData.
U.S. inventory was up about 12% in the third quarter, primarily due to inflation. That compared with a 26% increase in the second quarter. The U.S. unit currently has about $1 billion in excess inventory, down from $1.5 billion last quarter, John Furner, the head of the company’s
U.S. operations, said on the conference call.
For Walmart as a whole, revenue rose 8.7% in the third quarter to $152.8 billion. The Bentonville, Arkansas-based company now expects 5.5% sales growth for the year, a percentage point more than before.
Based on generally accepted accounting principles, Walmart reported a loss of 66 cents a share, dragged down in part by more than $3 billion in charges related to legal settlements regarding sales of opioids.
For planning purposes, Walmart expects an inflation rate next year of a little more than 3%, Rainey said. That’s about a percentage point lower than the median analyst estimate compiled by Bloomberg. McMillon said price increases have been particularly stubborn on dry goods in grocery, heralding potentially difficult negotiations with consumerpackaged goods suppliers.
Broadly speaking, Walmart’s improved profit outlook points to confidence that U.S. shoppers will still have at least some money to spend during the holidays after contending this year with the highest inflation rates in four decades. But its forecast of a 3% gain in U.S. comparable sales in the fourth quarter, excluding fuel, implies only steady gains, not the blow-out performance of the third quarter.