US retailer Walmart has increased its sales and profit forecasts for the second time this year, as Americans continue to visit its stores for affordable essentials, causing its shares to rise by over 7 percent in pre-market trading.
As the world's largest retailer by sales, Walmart is one of the first major US chains to report quarterly results, which could offer insights into consumer sentiment, especially following the government's report of an unexpected decline in the labor market, sparking recession fears. However, consumer spending has remained robust this year, supported by higher wages and low unemployment. US consumer prices dropped for the first time in four years in June, providing some relief to Americans dealing with high prices for essential items like meat, toilet paper, and packaged food. Data from the Labor Department released on Wednesday indicates that inflation continues to ease.
Walmart's dominance in the grocery sector shields it from some macroeconomic pressures. The Bentonville, Arkansas-based chain represents $1 out of every $5 spent on groceries in the United States, according to UBS analyst Michael Lasser. Walmart also generates approximately 70 percent of its nearly $650 billion in annual sales from selling everyday items such as vegetables, fruits, toilet paper, soap, and chocolate.
Walmart's status as a preferred shopping destination for value-conscious consumers has grown due to store and merchandise upgrades, as well as investments in curbside pickup and delivery services. These investments have helped Walmart gain market share across various income groups, particularly among upper-income households. The average number of transactions, a measure of store visits, increased by 3.6 percent in the second quarter at Walmart's US operations, while the average spending per visit rose by 0.6 percent compared to the same period last year. Online sales surged by 22 percent, driven by delivery and curbside pickup, according to the company.
The retail giant now anticipates its annual adjusted profit per share to range between $2.35 and $2.43, up from its previous forecast of potentially reaching the high end of a range between $2.23 and $2.37 per share. Walmart forecasts fiscal 2025 consolidated net sales to grow between 3.75 percent and 4.75 percent, compared to the previous range of 3 percent to 4 percent growth. The company reported second-quarter earnings of 67 cents per share, exceeding analysts' expectations of 65 cents, according to LSEG. Its total revenue increased by 4.8 percent to $169.3 billion, surpassing Wall Street's forecast of $168.53 billion.
Walmart's shares were up by 7 percent at $73.30 in pre-market trading, poised for a record opening. The blue-chip stock has risen by 30.7 percent so far in 2024, outperforming the S&P 500's 14.4 percent increase.
