Walmart raised its full-year forecast and reported better-than-expected first-quarter results on Thursday, attributing the positive outlook to easing inflation and stronger sales of groceries and non-essential merchandise like clothing and electronics. This optimistic update sent Walmart's shares soaring by as much as 7.3% to a record high of $64.22 in early trading, pushing its valuation to over 25 times expected earnings, up from a 10-year average of about 20, according to LSEG data. The robust performance of the largest U.S. retailer could help alleviate some investor concerns about declining consumer spending.
Walmart's first-quarter U.S. comparable sales, excluding fuel, rose by 3.9%, exceeding analyst expectations of a 3.15% increase. The company noted that average transactions, a proxy for online and store traffic, also rose by a similar amount, with shoppers adding more items to their carts. During a post-earnings call, CFO John David Rainey mentioned that inflation on Walmart's product range increased by about 0.4% in the quarter and expects similar inflation levels to persist throughout the rest of the year. Executives expressed optimism about growth in categories such as apparel, jewelry, home goods, and electronics.
Market Overview:
-Walmart (WMT) surpasses expectations with strong Q1 results and raises its full-year sales and profit forecast.
-The stock price reaches a record high, reflecting investor optimism about consumer spending resilience.
Key Points:
-Walmart's total U.S. comparable sales rose 3.9%, exceeding analyst predictions.
-Online sales surged 22%, driven by pickup & delivery services and a robust marketplace.
-Inflationary pressures are expected to persist, but Walmart sees opportunities in non-essential categories like apparel and electronics.
-Lower-income shoppers prioritize cost-saving options, including food at home and price rollbacks.
Looking Ahead:
-Walmart's performance signals potential market share gains and could impact the results of rivals like Target (TGT).
-The strong earnings report could dispel investor concerns about waning consumer spending.
-While inflation persists, Walmart's focus on value and online expansion positions it for continued growth.
Online sales in the United States surged 22%, surpassing the 17% growth seen during the holiday season. This growth was driven by Walmart's pickup and delivery services and increased sales through its third-party marketplace, which now offers more than 420 million items. Much of the online gains were attributed to households earning more than $100,000 per year. Brian Jacobsen, chief economist at Annex Wealth Management, noted that while sales increases were driven by volume rather than price hikes, wealthier consumers continue to play a significant role in boosting sales.
Walmart reported first-quarter adjusted earnings of 60 cents per share, beating the 52-cent average forecast. Total revenue of $161.51 billion also topped estimates. The retailer now expects annual consolidated net sales to rise at the high end or slightly above its prior forecast of 3% to 4% growth, and adjusted profit per share to be at the high end or slightly above its prior estimate of $2.23 to $2.37. Telsey Advisory analyst Joseph Feldman commented that Walmart's strong performance might indicate it is taking market share from other retailers, which could be a concerning sign for competitors like Target, which reports its results on May 22.
