Walmart lifts targets as shoppers pick low-priced groceries for the holiday

[November 16, 2023]  (Reuters) - Walmart raised its annual sales and profit forecast on Thursday for the second straight quarter, signaling a strong start to the holiday season.
 
The U.S. retail giant has used its size and scale to keep prices low despite inflation, drawing in not just low-income shoppers but also more high-income consumers looking for cheaper options to stretch their budgets.  

View of Walmart's newly remodeled Supercenter, in Teterboro, New Jersey, U.S., June 7, 2023. REUTERS/Siddharth Cavale/File Photo

The strong demand for low-priced products from groceries to clothing and gifts, coupled with better in-stock levels, has helped Walmart take more market share from other retailers - including dollar stores - in recent months.

Walmart now expects fiscal 2024 earnings per share of between $6.40 and $6.48, up from its prior forecast of $6.36 to $6.46.

It sees comparable sales for the full year rising in a range of 5% to 5.5%, compared with an increase of between 4% and 4.5% estimated previously.

"We're excited to get an early start to the holiday season," CEO Doug McMillon said.

Walmart's bigger focus on groceries has also provided a bulwark against the broad slowdown in discretionary spending - more than half of the company's merchandise comprises of food, and other daily essentials, while at rival Target discretionary goods take up a majority of the shelf space.

Profit margins have also improved for Walmart - rising 32 basis points in the third quarter, as the company takes less clearance compared to last year when an inventory glut had forced margin-sapping promotions. Easing supply chain costs have also helped.

The retailer's upbeat forecast echoes that of Target, which on Wednesday projected fourth-quarter earnings above estimates thanks to tighter inventory control.

Walmart is also doubling down on holiday merchandise across a wide range of price points to attract inflation-hit customers looking to make Christmas purchases on a budget. For instance, gift baskets on the Walmart U.S. website cost from as little as about $15 all the way up to nearly $140.

Comparable sales, or sales at Walmart's U.S. stores open at least a year, rose 4.9% in the third quarter ended Oct. 31, excluding fuel, above estimates of 3.35%. Online sales at Walmart rose 15%.

The company posted an adjusted profit of $1.53 per share in the third quarter. Analysts on average were expecting a profit of $1.52 per share.

(Reporting by Siddharth Cavale in New York and Deborah Sophia in Bengaluru; Editing by Susan Fenton)

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