Walmart allays market fears, lifts ETFs from consumer sector

VSConsumer-related exchange-traded funds gained strength on Tuesday after Walmart Inc. (NYSE: WMT) revealed it was in better shape than it looked, following a warning about prospects a few weeks ago.

Tuesday, the VanEck Vectors Retail ETF (RTH) increased by 2.0%, the Vanguard Consumer Staples Index Fund ETF Shares (VDC) gained 1.2%, the Fidelity MSCI Consumer Staples Index ETF (FSTA) increased by 1.2%, and the SPDR Consumer Staples (XLP) Sector Fund was up 1.1%.

Meanwhile, Walmart shares rose 5.0%. WMT represents 7.6% of RTH’s underlying portfolio, 6.9% of FSTA, 6.7% of VDC and 4.6% of XLP.

Walmart’s quarterly earnings report found that large retailers’ earnings and revenue beat analysts’ profit and revenue expectations, despite falling consumer demand for discretionary goods amid inflationary pressures. increased. On the other hand, the retailer has attracted greater demand for consumer staples, such as low-cost foods and daily necessities.

“The steps we have taken to improve inventory levels in the U.S., along with a stronger grocery sales mix, put pressure on the second quarter profit margin and our outlook for the year. We made good progress throughout the quarter operationally to improve costs in our supply chain, and this work is ongoing. We continue to build on our strategy to grow our digital business, including the continued strength we are seeing in our international markets, Doug McMillon, president and CEO of Walmart, said in a note.

The more upbeat tone this time around suggests Walmart could adapt to changing consumer spending habits as more Americans go out and spend money on experiences and cut back on discretionary spending in the face of to rising prices. The update helped ease some of the previous worries when the retailer issued a profit warning towards the end of July, fueling fears of a widespread economic slowdown.

“We certainly hope to put the pressures we experienced in the first half behind us as quickly as possible,” McMillon told analysts, adding that full-year profit will decline less sharply than expected. “But as you can see from our advice, we recognize the reality” in the face of rising prices.

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