Walmart reported better-than-expected profits and sales as shoppers suffering from persistent inflation flocked to discount chains to start their holiday shopping.
Walmart reported adjusted earnings per share of 58 cents for the three months ended Oct. 31, beating expectations of 53 cents. The company's revenue was $169.6 billion, beating expectations of $167.7 billion and up from $160.8 billion in the year-ago period.
The company said it expects net sales to increase 4.8% to 5.1% this year due to increased demand for discounted products, an upward revision from its previous forecast of 3.75% to 4.75%.
Walmart stock was up 4.9% on Tuesday morning.
Non-grocery sales declined for the 11th straight quarter, but rose year-over-year for the second consecutive quarter as customers continued to look for deals, CFO John David Rainey said. told CNBC.
“We expect this holiday period to be very consistent with that,” he said. “They are focused on price and value.”
The strong earnings report comes as reports show signs of easing inflation and gas prices are starting to fall, but Americans remain frustrated by high prices.
Walmart has emerged as a somewhat isolated player in the retail industry as it has grown its market share “primarily from high-income households.” Households earning more than $100,000 a year accounted for 75% of Walmart's profits. According to CNN.
This trend shows that households of all income levels are looking for discounts and sales as they struggle with sticker shock on everyday items, and Walmart is benefiting from that. Walmart stock has increased 66.1% since the beginning of the year.
President-elect Donald Trump's pledge to impose tariffs on imports from China and other countries has raised concerns that his policies will reignite inflation. During his presidential campaign, President Trump said he would impose tariffs of 10% to 20% on all imports, including 60% to 100% tariffs on products from China.
Rainey warned that the tariffs could force discount chains to raise prices, even though they rely on “everyday low prices” to attract customers.
“We never want to raise prices,” Rainey said. “But there will probably be a case for higher prices for consumers.”
He said about two-thirds of the products Walmart sells are made in the United States.
“We've lived in a tariff environment for seven years, so we know it very well,” Rainey told CNBC. “However, tariffs are inflationary for our customers, so we want to work with our suppliers and our own private label assortment to bring prices down.”
Trump's transition team did not respond to requests for comment.
Meanwhile, increased discretionary spending and home delivery supported Walmart's third-quarter earnings.
Same-store sales at Walmart increased 5.3%, and same-store sales at Sam's Club increased 7%.
The number of visits to Walmart stores and its website, as well as the amount spent per visit, increased in the third quarter. Compared to last year, U.S. transaction value increased by 3.1% and average number of tickets increased by 2.1%.
E-commerce sales rose 22% in the U.S. as more customers took advantage of Walmart's delivery and curbside pickup options.
Rainey said Walmart's e-commerce division is “very close to profitability” as more customers pay extra for faster one- and three-hour deliveries.
Holiday spending is expected to increase this year, although not as much as in previous years. Holiday spending in November and December is likely to rise 2.5% to 3.5%, to $979.5 billion to $989 billion, according to the National Retail Federation. This growth rate is lower than last year's 3.9% increase, when spending totaled $955.6 billion.
But Rainey said the holiday season is “off to a pretty good start” at Walmart.
Big-ticket items like TVs, Apple AirPods, Beats headphones, and even car tires are disappearing from shelves. On the other hand, unseasonably warm weather continued in some parts of the country, and sales of cold-weather clothing and heating equipment were sluggish.
