Walmart boosts outlook after strong quarter, shares surge 7%

[August 15, 2024]  By Siddharth Cavale and Savyata Mishra

(Reuters) -U.S. retailer Walmart raised its sales and profit forecasts on Thursday for the second time this year, as Americans kept flocking to its stores for inexpensive essentials, sending its shares up more than 7% in premarket trading.

The world's largest retailer by sales is among the first major U.S. chains to report quarterly results that could provide insight into how consumers are feeling, particularly after the government reported an unexpected deterioration in the labor market, raising fears of a recession.

Still, consumer spending has remained resilient this year, bolstered by higher wages and low unemployment. U.S. consumer prices fell for the first time in four years in June, offering some relief to Americans struggling with steep prices for meat, toilet paper and packaged food. Data released on Wednesday by the Labor Department showed inflation continues to moderate.

Due to its heft in grocery, Walmart is insulated from some of the pressures in the macro economy. The Bentonville, Arkansas-based chain accounts for $1 of every $5 spent on groceries on the United States, according to UBS analyst Michael Lasser. Walmart also generates about 70% of its nearly $650 billion in annual sales from selling everyday items such as vegetables, fruits, toilet paper, soap and chocolate.

Walmart's reputation as a destination for value shoppers has expanded, thanks to store and merchandise upgrades and investments in curbside pickup and delivery.

These investments helped it gain market share across several income-categories, led by upper-income households.

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

The average number of transactions - a proxy for store visits - rose 3.6% in the second quarter at Walmart's U.S. operations, while the average ticket, or how much shoppers spent per trip, climbed 0.6% in the latest quarter from a year ago. Online sales rose 22%, led by delivery and curbside pickup, the company said.

The retail bellwether forecast annual adjusted profit per share to be between $2.35 and $2.43, compared with its prior expectations to potentially better or be at the high end of a range of $2.23 to $2.37 per share.

Fiscal 2025 consolidated net sales is now forecast to grow in the range of 3.75% to 4.75% from a prior range of 3% to 4% growth.

The company posted second-quarter earnings of 67 cents per share, beating analysts' expectations for 65 cents, according to LSEG. Its overall revenue rose 4.8% to $169.3 billion, beating Wall Street forecasts of $168.53 billion.

Walmart shares were up 7% at $73.30 in premarket trading and were on track for a record open. The blue-chip stock has climbed 30.7% so far in 2024, outperforming the S&P 500's 14.4% rise.

(Reporting by Siddharth Cavale in New York and Savyata Mishra in Bengaluru; Editing by Rod Nickel)

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