Walmart Inc, the world’s largest retailer, reported better-than-expected second-quarter sales and profits, leading to an increase in its full-year forecasts. The company attributed its success to strong demand for its affordable groceries and health and wellness products. Despite a 12.3% increase in Walmart’s stock this year, shares were slightly down in morning trading. Art Hogan, chief market strategist at B Riley Wealth, praised the earnings report and stated that it also bodes well for the upcoming back-to-school and holiday shopping seasons.
Walmart’s U.S. stores experienced a 6.4% rise in sales, excluding fuel, in the three months ending July 31, beating Refinitiv’s estimate of a 4.4% increase. The company also noted an increase in average transactions and the number of items shoppers placed in their carts.
Walmart’s Chief Financial Officer, John David Rainey, commented on the shopping habits of consumers, stating that they are focused on buying food and health and wellness products. Rainey also mentioned that the easing inflation on general merchandise products, such as apparel, contributed to increased purchases. The company saw strong responses from shoppers during seasonal events such as Memorial Day and July 4, as well as the back-to-school season.
As a result of these positive trends, Walmart raised its guidance and now forecasts a 4% to 4.5% increase in net sales growth for the year, up from the previous estimate of 3.5%.
Rainey was cautious in his assessment of consumer strength, stating that although consumers are not suffering, he hesitates to say they are strong. Despite rising interest rates and elevated prices for goods, U.S. consumers have shown resilience and continue to spend. However, Rainey warned that rising energy costs and the resumption of student loan payments in October may impact spending power in the coming year.
Walmart investor Huntington Private Bank expressed concern over the company’s forecast, as it implies slower growth. However, senior equity analyst David Klink acknowledged that the forecast is conservative compared to Walmart’s strong growth in the first and second quarters. Charles Sizemore, founder of Sizemore Capital Investments and a Walmart investor, supported the company’s cautious approach, citing a softer economy and sticky inflation as potential factors that could impact discretionary item sales.
Walmart expects fiscal 2024 earnings per share to be in the range of $6.36 to $6.46, surpassing its previous forecast of $6.10 to $6.20. This outlook contrasts with rival Target, which recently reduced its full-year expectations. Home Depot, a home improvement chain, maintained its full-year guidance.
In summary, Walmart’s strong second-quarter sales and profits, driven by the popularity of its low-priced groceries and health and wellness products, have led to an increase in its full-year forecasts. The company remains cautious about consumer spending due to potential economic challenges and rising inflation. Despite these concerns, Walmart’s performance is expected to remain favorable.
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