CFRA Senior Vice President Arun Sundaram analyzes Walmart and Target’s earnings, expectations for their stock prices, and changes in the way consumers shop.
Walmart, America’s largest retailer and private employer, lured shoppers with deeper discounts on groceries and reported strong quarterly results that beat Wall Street expectations.
The Arkansas-based company said consolidated sales rose 4.8% to $169.34 billion for the three months ended July 31, beating Wall Street expectations of $168.53 billion. Adjusted earnings per share were $0.67, beating analysts’ expectations of $0.65.
The company also raised its full-year outlook, saying it now expects sales to grow 3.75% to 4.75% and earnings per share to be between $2.35 and $2.43.
At its U.S. division, the company’s net sales reached $115.3 billion. Sales at stores open at least a year increased 4.2%, driven primarily by increased grocery sales.
A customer browses bed sheets on display at a Walmart store in Secaucus, New Jersey, on March 5, 2024. (Gabby Jones/Bloomberg via Getty Images/Getty Images)
Walmart said it saw positive signs in its general merchandise division for the three months ended July 31, helping to push sales to a flat to slightly positive figure for the first time in 11 quarters.
Meanwhile, the company continued to offer temporary discounts on groceries, with 7,200 price cuts in the U.S. during the quarter, and food price cuts up 35%.
Walmart attracts high-income shoppers as prices continue to rise
Walmart’s profits last quarter also beat Wall Street expectations, but Chief Financial Officer John David Rainey warned that “many consumers’ wallets are still tight.”
For the second straight quarter, the company has been winning over higher-income customers — those households making more than $100,000 a year — which the company said accounted for most of its market share gains last quarter. Walmart reported sales of $161.5 billion for the three months ended April 30 and issued an upbeat outlook.
Walmart is currently the largest retailer in the United States. (David Paul Morris/Bloomberg via Getty Images/Getty Images)
The Arkansas-based retailer is a key indicator of the plight of U.S. consumers facing rising prices as rising inflation continues to strain budgets.
Walmart CFO says high inflation means ‘many consumers’ wallets are tight’
Inflation fell in July, a positive sign, but consumers are still seeing rising food prices, which have been a sticking point for many families for years. Food prices rose 0.2% over the month, with groceries rising 0.1%.
Since 2021, food prices have soared by more than 21%.
The company stepped up price cuts on groceries in April to keep sales strong, especially among price-conscious shoppers — up 45% from a year ago — and also launched its own grocery brand for the first time in decades.
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The move to lower prices has enticed consumers and “led to increased unit sales across all income groups,” Joe Feldman, senior managing director at Telsey Advisory Group, wrote in a research note earlier this summer.
Feldman said he believes the company is “well positioned to gain market share across all income levels, regardless of environment.”
“The expansion of high-quality merchandise, including premium and private-label brands, along with the convenience of Walmart+ membership and digital/marketplace offerings, should help the company capture and retain share of higher-income households,” Feldman wrote.
