December 2, 2023

A Walmart in Atlanta, Ga., on Sunday, Feb. 19, 2023.

Dustin Chambers | Bloomberg | Getty Images

walmart It raised its full-year forecast on Thursday as sales rose nearly 8% in the fiscal first quarter, with its large grocery business helping to offset weaker sales of apparel and electronics.

Shares of the company closed up about 1% on Thursday as the company beat Wall Street earnings and revenue expectations.

Walmart raised its guidance to reflect better-than-expected earnings. The company said it now expects consolidated net sales to rise about 3.5% for the fiscal year. It expects full-year adjusted earnings per share of $6.10 to $6.20, roughly in line with analysts’ expectations, according to Refinitiv data.

Chief Financial Officer John David Rainey said consumers are buying fewer discretionary items, waiting for sales before buying big-ticket items like TVs and switching to lower-priced items such as Buy cereal in smaller boxes.

However, shoppers are still spending, he added.

“We’re seeing some pressure on the consumer in these economic indicators, but we’ve been surprised by the resilience,” he told CNBC. Much stronger, even at this point.”

Here’s what Walmart reported for the three-month period ended April 30, according to Refinitiv consensus estimates:

  • Earnings per share: $1.47 adjusted vs. $1.32 expected
  • Revenue: $152.3 billion vs. $148.76 billion expected

Walmart’s quarterly results provided the latest snapshot of the health of the U.S. consumer. earlier this week, The Home Depot and Target Indicates that shoppers are buying fewer big-ticket and discretionary items as they pay more for essentials. For example, Home Depot customers opted for smaller home items over pricier items, and Target shoppers more often skipped home furnishings and apparel, resulting in lower category sales.

Walmart sales also reflected a shift toward groceries and essentials, Rainey said. Unlike some rivals, however, the big box retailer is well-suited for the change as the nation’s largest grocer.

Nearly 60% of its annual U.S. sales come from groceries. General merchandise sales in the U.S. fell in the mid-single digits in the quarter, while food and consumer sales rose in the low double digits, Rainey said on an investor call.

DCLA's Sarat Sethi on Walmart's Q1 earnings: Consumers are spending more on groceries and essentials

However, that mix weighed on the company’s first-quarter gross margin, which declined year-over-year because food has lower margins than other commodities.

The big retailer’s net income fell to $1.67 billion, or 62 cents a share, from $2.05 billion, or 74 cents a share, a year earlier.

Total revenue rose to $152.3 billion from $141.57 billion a year earlier, beating Wall Street expectations.

Rainey told investors on a conference call that the retail giant is attracting new and more frequent shoppers — including younger and wealthier customers — as inflation affects Americans’ spending decisions.

Walmart U.S. same-store sales climbed 7.4%, excluding fuel. Key industry indicators include sales at stores and clubs open at least a year. At Sam’s Club, same-store sales excluding fuel rose 7% year-over-year, driven by grocery sales.

Online growth was one of Walmart’s bright spots this quarter. Walmart U.S. e-commerce sales were up 27% year-over-year and at Sam’s Club, e-commerce sales were up 19%.

The retailer differed from Target, whose digital sales fell 3.4% in the first quarter.

At Walmart, curbside pickup and home delivery of online purchases drove growth, Rainey said on an investor call. Customers have indicated in internal research that they are turning to Walmart for convenience and value, he said.

Despite the increase in sales, Rainey said spending trends softened as the quarter progressed, with the biggest drop after February. He attributed that in part to the termination of the Supplemental Nutrition Assistance Program’s pandemic-related emergency funding and a decline in rebates.

On a conference call with investors, Chief Executive Doug McMillon said rising prices for everyday items such as food and paper products continue to squeeze household budgets month after month, leading to spending on other reduction in spending.

Stubborn inflation “is one of the key factors that creates uncertainty for our second half,” he said.

For the fiscal second quarter, Walmart said it expects consolidated net sales to rise about 4% and adjusted earnings per share to be in the range of $1.63 to $1.68. That was below the $1.71 a share Wall Street was expecting, according to a Refinitiv consensus estimate.

Wal-Mart shares closed at $149.53 on Wednesday, giving it a market capitalization of $403.33 billion. Its shares are up nearly 6% year to date. The stock trailed the S&P 500’s gain of about 8%, but ahead of retail-focused XRT’s nearly 2% gain over the same period.

Correction: Shares of Walmart trailed the S&P 500’s gain of about 8%, but ahead of retail-focused XRT’s nearly 2% gain over the same period. Earlier versions incorrectly stated their status.