Walmart beats Wall Street expectations, raises outlook as it offers more grocery discounts

Walmart, the largest retailer and private employer in the U.S., reported another strong quarter, surpassing Wall Street expectations as it enticed shoppers with more discounts on groceries. 

Shares hit a new all-time high on Thursday with the largest percent increase since March 2020, as tracked by Dow Jones Market Data Group. 

Walmart said it saw promising signs in its general merchandise category, reporting flattish to very slightly positive sales for the first time in 11 quarters, during the three-month period ending July 31. 

Meanwhile, the company continued to offer more temporary discounts. 

"In Walmart U.S., we have more than 7,200 rollbacks across categories. Customers from all income levels are looking for value, and we have it" Walmart CEO Doug McMillon told investors on the earnings call. Rollbacks in food jumped 35% during the quarter. 

Consolidated revenue climbed 4.8% to $169.34 billion during the three-month period ending July 31, higher than the $168.53 billion Wall Street expected. Adjusted earnings per share came in at $0.67, also above the $0.65 analysts expected.

The company also raised its guidance for the full year. It now expects sales to increase by 3.75% to 4.75% and earnings to come in at $2.35 to $2.43 per share.

For its U.S. segment, the company generated $115.3 billion in net sales. Sales at stores open for at least a year grew 4.2%, driven in large part by increased transactions in grocery. 

WALMART GAINS HIGH-INCOME SHOPPERS AS ELEVATED PRICES PERSIST

During the prior fiscal quarter, Walmart's earnings also topped Wall Street expectations, though CFO John David Rainey warned that "many consumer pocketbooks are still stretched."  

The company has continually gained higher-earning shoppers, households that exceed $100,000 a year, in back-to-back fiscal quarters. That group of high earners continued to account for the majority of the share gains in the prior quarter, the company said. Walmart reported revenue of $161.5 billion for the three-month period ending April 30 and issued an upbeat forecast. 

The Arkansas-based retailer is a key indicator of the state of the American consumer, which has faced elevated prices as higher inflation continues to weigh on budgets.

WALMART CFO SAYS 'MANY CONSUMER POCKETBOOKS' ARE BEING STRETCHED AS HIGH INFLATION PERSISTS

In a positive sign, though, inflation eased in July. However, consumers still saw a rise in food prices, which have been a constant pain point for many households for years. The cost of food rose 0.2% over the course of the month, which included a 0.1% increase in groceries. 

Since 2021, grocery prices have surged more than 21%.

In April, the company ramped up its grocery rollbacks, up 45% year over year, to keep sales strong, especially among price-sensitive shoppers. It also launched its first private grocery label in decades.

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Joe Feldman, Telsey Advisory Group's senior managing director, wrote in a research note earlier this summer that the move to cut prices enticed consumers and resulted "in higher unit sales across all income groups." 

Feldman said the firm believes the company is "well-positioned to gain market share across all income groups regardless of the environment." 

"The expansion of quality merchandise, including premium and private brands, as well as convenience via Walmart+ membership and digital/marketplace, should help gain and retain share among higher income households," Feldman wrote.

Shares of Walmart have advanced over 38% this year, beating the S&P 500's 16% rise.