High-income shoppers turned to Walmart to cut grocery costs amid soaring inflation, which helped boost sales at the nation’s largest retailer in the second quarter.
However, this price hike also led customers to cut back on unnecessary items, which weighed on profits as Walmart was forced to cut prices and empty inventory.
“We’re excited to see more customers choosing Walmart during this period of inflation,” CEO Doug McMillon said. “The steps we have taken to improve inventory levels in the United States, along with a stronger grocery sales mix, have put pressure on the profit margin.”
Walmart has consistently exceeded Wall Street expectations and sales at stores open for at least a year rose 6.5% as more Americans, looking for savings, shopped at Walmart .
This is more than double the same-store sales increase the company saw in the first quarter.
And Walmart said it is making progress in eliminating excess inventory, although it remains a problem. The company said on Tuesday that the decline in earnings it forecast just a month ago would be smaller than it thought.
Shares of Walmart jumped more than 5% to $139.82 by midday.
Bentonville, Ark.-based Walmart is among the first major retailers to report quarterly results and is considered a crucial spending barometer given its size and breadth of customer base.
Walmart shocked Wall Street three weeks ago by lowering its earnings outlook for the first time since 2015 and shares of a company that thrived during the pandemic fell 10%.
The warning followed Target, another pandemic superstar, announcing the previous month that it was canceling orders from suppliers as its inventory piled up, spared by consumers whose shopping habits were rapidly changing. as COVID-19 loosened its grip.
Sales of casual clothes, televisions and other electronics that have flown off shelves and into the homes of Americans sheltering in place during the pandemic, have stalled as people have resumed going to restaurants, shows or to travel again.
Stubborn inflation, which slowed last month but is still near its highest level in four decades, is also presenting challenges for retailers as low-income shoppers cut spending.
Those shoppers are buying hot dogs or canned tuna rather than more expensive deli meats, Walmart said Tuesday. Private label sales in grocery stores doubled in the second quarter compared to the first quarter.
Still, Walmart said things were looking up a bit as the second quarter progressed. He saw the influx of new customers and lower prices relieved buyers. Heavy back-to-school spending helped.
Walmart earned $5.15 billion, or $1.88 per share, or $1.77 excluding costs and one-time fees. That easily beat the $1.62 per share Wall Street was looking for, according to FactSet.
It also topped last year’s profit by $4.27 billion.
Sales rose 8.4% to $152.86 billion, beating industry analysts’ forecasts.
It now expects consolidated adjusted operating profit to decline 9% to 11% for the year, an improvement from the company’s earlier forecast of 11% to 13%.
New York Post