NEW YORK - Walmart racked up another strong quarterly sales gain as its low-prices continue to attract budget conscious consumers looking for deals in a tough economic environment.
The nation's largest retailer boosted its annual outlook Thursday after reporting better-than expected second-quarter results sending shares, already up 13% this year, slightly higher at the opening bell.
Walmart is among the first batch of major retailers to report results for the three-month period ended July and is considered a crucial barometer of spending, given its size and the breadth of its customer base. And the performance at the low-cost store compared with many of its peers, where sales are flagging under the weight of inflation, reveals a lot about a massive swath of U.S. consumers right now.
A strong job market, rising wages and pockets of easing inflation have juiced spending by Americans. But rising energy prices, the recent resumption of student loan payments put on hold during the pandemic and rising interest rates mean that millions more people are starting to feel increased economic pressure, Walmart CEO Doug McMillon told analysts on Thursday.
Shoppers wait in line to pay for their purchases at a Walmart store in Los Angeles, California (Credit: ROBYN BECK/AFP via Getty Images)
That has benefited Walmart, which books more than half of its sales each year from its grocery aisle. Walmart also said that in recent quarters it has begun to attract higher-income shoppers, while longtime customers trade down to private-label items that are less expensive than national brands. And customers are buying more grocery staples and turning to hand blenders, stand mixers and other kitchen tools as they prepare more meals at home, Walmart said.
"When you put all this together, we see families that are discerning about what they’re spending on," McMillon said. "They’re setting priorities and spending on the things they care most about. We saw that during the first half. We see people across income cohorts come to us more frequently looking to save money on every day needs."
Many other retailers do not have the wide breadth of product mix that Walmart has, and they've seen sales fade as shoppers pull back spending on discretionary items, from accessories to appliances. Target reported its first quarterly sales decline in six years on Wednesday, dragged down by cautious spending in addition to backlash by some customers to its Pride merchandise.
Home Depot, the nation’s largest home improvement retailer, said Tuesday that sales continue to decline, with a fall-off in big-ticket items like appliances and other things that often require financing. That’s become a problem with interest rates rising rapidly over the past year, making credit cards a much bigger burden for consumers.
Earlier this week, the U.S. reported that Americans increased their spending last month, but higher interest rates are weighing on spending that is more commonly dependent on credit, like homes, cars and furniture.
To cater to its neediest customers, Walmart slashed the price of its online subscription shopping service in half for those on government assistance, to keep those customers. Walmart said the Walmart+ service will cost $49 a year, or $6.47 per month for those on Medicaid, Social Security, the Supplemental Nutrition Assistance Program (commonly known as food stamps) or other programs. Its regular membership costs $98 annually.
Walmart launched its subscription service in 2020, and has been adding more perks as a way to compete with Amazon Prime, which was unveiled in 2005. Amazon’s annual membership now costs $139 per year, and it also has been adding benefits. The online retailer began offering discounts to those on government assistance in 2017.
Walmart Inc., based in Bentonville, Arkansas, earned $7.89 billion, or $2.92 per share, for the three-month period ended July 31. Adjusted results were $1.84 per share, or 13 cents better than Wall Street had expected, according to a survey of industry analysts by FactSet. It was also up from last year’s quarterly profit of $5.15 billion.
Sales rose nearly 6% to $161.63 billion, a shade better than expected.
Comparable store sales — those from established stores and online operating over the past 12 months — rose 6.4% at Walmart’s U.S. division. That compares with 7.4% in the quarter ended April and the 8.3% during the fourth quarter. Global online sales surged 24%, down 2% from the previous period.
Walmart said Thursday it expects sales to rise 3% and anticipates $1.45 per share to $1.50 per share for the current quarter. For the year, it now projects sales to be up 4% to 4.5% and shares to be $6.36 per share to $6.46 per share. In the previous quarter, it had projected sales to be up 3.5% and anticipated a per share range of $6.10 to $6.20 for the year.
Analysts had expected $1.49 per share for the current quarter and $6.30 per share for the year, according to FactSet.
In another news, Walmart said Wednesday that it has promoted Sam’s Club CEO Kathryn McLay as the new head of its international business. McLay succeeds Judith McKenna, who is retiring after 27 years with the company. The discounter said that Chris Nicholas, Walmart's U.S. chief operating officer, will become the president and CEO of Sam’s Club U.S. The leadership changes will be effective on Sept. 11, the discounter said.