Walmart raised its annual profit forecast after quarterly sales beat expectations, cementing the chain’s status as a winner from a period in which high inflation has stretched the finances of American households.
The company on Thursday forecast that its net sales would increase by 3.75 per cent to 4.75 per cent in the current financial year, about 0.75 percentage points higher than its previous guidance.
Adjusted operating profit is likely to grow by 6.5 to 8 per cent, up from a previous forecast of about 4 to 6 per cent.
With its profits rising faster than its sales, investors have flocked to Walmart’s stock, helping lift it by 29 per cent this year to Wednesday, almost double the rise in the US stock market. Shares in Walmart jumped about 6 per cent in pre-market trading on Thursday.
US consumers have shown signs of spending fatigue after years of persistent inflation that is only now subsiding. The price pressures have been good for Walmart, where transaction numbers are on the increase in the US.
The company said that in the second quarter that ended last month, its namesake grocery and merchandise store chain gained share of US sales “across income cohorts primarily driven by upper-income households”, attracted by its “value-convenience proposition”.
In groceries, Walmart stores have captured 21.4 per cent of US sales in the past year, according to market research group Numerator, gaining ground on supermarket rivals such as Kroger and Albertsons, which have been pursuing a merger in part to compete with Walmart.
Same-store sales rose by 4.2 per cent year on year — well above Wall Street estimates — and increased by 4.6 per cent at its members-only Sam’s Club warehouse chain.
US inflation is on the downswing, last month falling back below 3 per cent, but price levels for groceries and consumer goods are between a quarter and a third higher than before the pandemic, government data shows.
Walmart has been among retailers boosting discounts to draw shoppers to stores. In the second quarter it offered temporary price cuts on 7,200 items, including a 35 per cent increase in the number of such “rollbacks” for food.
Quarterly revenue of $169.3bn topped estimates of $168.47bn after rising 4.8 per cent year on year, faster than Walmart’s previous guidance.
Net income fell 43 per cent to $4.5bn, a drop that reflected certain one-off items. Excluding those items, adjusted earnings per share rose by nearly 10 per cent to 67 cents, beating estimates.
“Each part of our business is growing,” Walmart chief executive Doug McMillon said.
