WALMART THRIVES AMID ROUGH RETAIL SETTING
Company draws in budget-conscious shoppers in first quarter, ratchets up outlook
Walmart reported strong firstquarter sales results as the nation’s largest retailer’s low-prices continue to draw budget conscious consumers in a challenging economic environment of stubbornly high inflation, particularly in groceries.
The company beat Wall Street expectations Thursday and boosted its annual profit and sales outlook.
Comparable store sales — those from established stores and online operating over the past 12 months — rose 7.4 percent in the quarter ended April, a bit slower than the 8.3 percent during the fourth quarter but still impressive. Global online sales surged 26 percent.
“Globally, customers continue to seek value given the impact of inflation,” CEO Doug McMillon told analysts Thursday. “We see it in the U.S. and in other markets like Mexico, Canada and Chile.”
Other major retailers posted quarterly results this week, and there was a marked slowdown in spending, an environment in which Walmart can thrive due to its focus on low prices and a focus on necessities like groceries. Groceries account for more than half of Walmart sales.
Walmart said its groceries market share is growing among higher income shoppers and younger customers.
But the Bentonville, Ark., company also said shoppers remain cautious, trading down to private label goods from more expensive national brands. It noted sales slowed at the end of the quarter as the pandemicera SNAP benefits — the monthly food-assistance vehicle commonly known as food stamps — expired.
That cautiousness was on display this week in quarterly reports from major U.S. retailers.
Home Depot, the nation’s largest home improvement retailer, said Tuesday that sales for the first quar
ter fell 4.2 percent, and it expects its first annual revenue decline since 2009.
On Wednesday, Target reported another quarterly profit decline and issued a cautious sales and profit outlook. The Minneapolis company is dealing with rising costs, which includes rising theft as a big factor. Target has been more vulnerable to shoppers’ focus on necessities as roughly 20 percent of it total sales are from groceries.
And despite modestly stronger spending last month, recent government data revealed how Americans are barely keeping up with inflation.
Walmart reported net income of $1.67 billion, or 62 cents per share for the three month period ended April 30. Earnings, adjusted for non-recurring costs, came to $1.47 per share, far exceeding the per-share earnings of $1.32 that Wall Street was looking for, according to a survey by FactSet.
That compares with $2.05 billion, or 74 cents per share, in the year ago period.
The retail sector has been under strain as millions of shoppers shift from buying
clothing and home furnishings, to necessities. Walmart, however, said it’s seen easing costs in its supply chain and freight from last
year, which will improve margins.
General merchandise costs are now lower than a year ago in the U.S., McMillon
said, but they’re still higher than two years ago. In grocery and consumable categories like paper products, Walmart is still seeing high single digit to low double digit inflation in the cost of goods.
“The persistently high rates of inflation in these categories, lasting for such a long period of time, are weighing on some of the families we serve,” McMillon said.
The cumulative effect of stubborn inflation will create more uncertainty in the second half of the year, McMillon said, adding that the company is working with suppliers to bring costs down.
Walmart’s overall sales rose 7.6 percent, to $152.3 billion, which is also better
than most had projected. Walmart’s namesake chain posted a net sales increase of 7.2 percent, while its international business saw a 12 percent uptick. Sam’s Club had a 4.5 percent increase in net sales.
Walmart expects that consolidated net sales will rise 3.5 percent this year, higher than the previous guidance of 2.5 percent to 3 percent. The retailer also projects that per share results for the year will be $6.10 to $6.20, up from the previous range of $5.90 to $6.05.
For the current quarter, it expects per share results to be in the range of $1.63 to $1.68, below Wall Street estimates of $1.71.