Walmart Apple Inc. raised its full-year forecast on Thursday, as quarterly revenue grew about 5%, the company's stores and website attracted more traffic and sales outside the grocery department improved.
The company beat Wall Street expectations for sales and profits, and its shares rose about 6% in premarket trading.
Walmart said it now expects full-year sales to rise 3.75% to 4.75%, and adjusted earnings to be between $2.35 and $2.43 a share. It had previously said it expected to be at or slightly above its initial full-year guidance, which called for net sales growth of 3% to 4% and adjusted earnings per share of $2.23 to $2.37.
While Walmart raised its outlook, its outlook for the second half of the year may not be as strong as Wall Street had anticipated. The company expects adjusted earnings of 51 to 52 cents a share for the third quarter, below analysts’ expectations of 54 cents. Analysts had expected adjusted earnings of $2.43 a share for the year — the high end of Walmart’s forecast.
In an interview with CNBC, Chief Financial Officer John David Rainey said the company's brighter outlook reflects strength in the first half of the year.
“We see among our members and customers that they remain selective, discerning, value-seeking and focused on things like essentials rather than discretionary items, but most importantly, we don’t see any further erosion of consumer health,” Rainey said.
He said every month of the quarter had been “relatively stable.” He added that the back-to-school season was “off to a very good start.”
Walmart noted another promising sign: Sales of general merchandise, such as lawn and garden supplies, were positive for the first time in 11 quarters. Those sales were up only slightly, he said, but it was “an encouraging sign for us.”
Here's what the company reported for the second quarter of the fiscal year compared to what Wall Street expected, according to a survey of analysts conducted by LSEG:
Earnings per share: 67 cents adjusted vs. 65 cents expectedRevenue: $169.34 billion vs. $168.63 billion
Walmart's net income fell to $4.5 billion, or 56 cents per share, in the three months ended July 31, compared with $7.89 billion, or 97 cents per share, in the year-ago period.
Revenue was up from $161.63 billion in the year-ago quarter.
Walmart U.S. comparable sales, excluding fuel, rose 4.2% in the second quarter from a year earlier, beating analysts’ expectations. The industry measure includes sales from stores and clubs open at least a year.
At Sam's Club, comparable sales, excluding fuel, rose 5.2%, in line with analysts' expectations.
E-commerce sales rose 21% globally and 22% in the US.
Walmart customers in the U.S. visited the company’s stores and website more and spent slightly more during the quarter compared with the same period a year ago. Transactions rose 3.6% and the average ticket rose 0.6% compared with the year-ago quarter.
Walmart provided the latest window into the health of U.S. households and the outlook for the broader economy as investors and economists seek clarity.
As the nation’s largest retailer, Walmart is uniquely positioned to offer insights into where consumers are spending and saving money. The company’s reputation for value has helped boost sales over the past two years, as inflation has driven more high-income shoppers to its stores and website.
According to July data from the U.S. Department of Labor, inflation has slowed and returned to historic levels. The Consumer Price Index, which measures the prices of a broad range of goods and services, rose 2.9% last month compared with a year earlier. That’s the lowest level since March 2021.
Inflation has been flat for Walmart on a year-over-year basis, so its sales growth was driven by selling more units rather than higher prices, Rainey told CNBC. He said it saw 7,200 “refunds,” or short-term deals, on merchandise during the quarter, including a 35% increase in the number of refunds on food items.
However, prices remain significantly higher than pre-pandemic levels, frustrating and stressing consumers. The Labor Department’s jobs report earlier this month also raised concerns and prompted a sharp sell-off in the stock market, with job growth slowing and the unemployment rate rising more than expected.
Earnings reports from some companies added to concerns about the economy. Home Depot Store Apple Inc. reported quarterly results that beat expectations on Tuesday on earnings and revenue, but warned of slowing sales in the second half of the year and consumer caution, even among its middle- and upper-income customer base.
In addition to wooing shoppers tired of inflation, Walmart has taken its own steps to drive growth. It has looked outside traditional retail channels, adding more sellers to its third-party marketplace, selling more ads and attracting more members to its subscription service, Walmart+. It has also launched a new grocery brand, Bettergoods, where most items are priced under $5 — including meal solutions like frozen pizza and chicken wings.
Rainey said Walmart is likely to benefit as customers look for cheaper alternatives to fast food. He pointed to inflation data released this week that showed the price gap between eating at home and eating out continues to grow.
“It makes sense that customers would be preparing more meals at home rather than eating out,” he added.
Walmart shares closed Wednesday at $68.66. So far this year, the company’s shares have risen about 31%, outpacing the S&P 500’s gain of about 14%.
