Walmart Hits Record High on Optimistic Outlook as Shoppers Look for Inflation Relief - Latest Global News

Walmart Hits Record High on Optimistic Outlook as Shoppers Look for Inflation Relief

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Walmart raised its full-year outlook after a quarterly report that beat forecasts, helping its shares hit a record high as stubborn inflation continues to attract U.S. consumers looking to stretch their dollar further.

Executives at the world’s largest retailer said consumer trends seen in recent quarters have largely held up. These included shoppers choosing essentials over necessities, Walmart’s increasing popularity among wealthier customers and “slightly positive” inflation.

While the macroeconomic outlook remains uncertain, the lack of a significant deterioration in conditions at Walmart earlier this year provided some comfort given the company’s reputation as a leader among consumers.

Investors responded to the improving sales and profit outlook and “steady” start to the year by pushing shares up 6 percent in midday trading on Thursday, putting the stock on track for its biggest single-day rise since November 2022.

“Many consumers’ wallets are still tight, and we’re seeing the impact of that in our business mix as they spend more of their paychecks on non-discretionary categories and less on general merchandise,” Chief Financial Officer John Rainey said in a call with investors.

The Bentonville, Arkansas-based company now expects full-year net sales growth to be at the high end or slightly above its original forecast of 3 percent to 4 percent. Adjusted earnings per share are expected to be at the high end or slightly above the original guidance of $2.23 to $2.37.

The rosy outlook came with first-quarter revenue rising 6 percent to $161.5 billion, beating analysts’ expectations of $159.5 billion. Net profit jumped to $5.1 billion, about a fifth above Wall Street forecasts, as the retailer benefited from lower markdowns and better inventory management.

Rainey said sales growth in the quarter was due to the sale of more units and higher foot traffic in stores rather than inflation. The number of transactions at the company’s main Walmart stores in the U.S. rose 3.8 percent in the three months ended April, although the average ticket price remained flat, suggesting the U.S. consumer is still looking for ways to be to save money.

Rainey said the company’s overall inflation rate increased about 40 basis points in the quarter, which was half the rate of increase recorded last year. He forecast that inflation for the rest of the year will be “relatively close to what we saw in the quarter,” adding that general goods were more deflationary, but consumer staples and food were “slightly above the same level up to.” an increase of 1 percent.

Chief Executive Doug McMillon had predicted in November that the company could “manage a period of deflation” in early 2024, providing potential relief for consumers, but that has not materialized. This week’s economic data showed that while year-on-year growth in consumer prices eased to 3.4 percent in April, inflation remained stubbornly high.

With relief from price increases still limited, Rainey said many of the “value-seeking” behaviors it observed last year have continued.

The market share gains in the first quarter were “driven primarily by higher-income households,” defined as households earning more than $100,000 per year. This continues a trend that has been observed in recent quarters.

Rainey said that while sales of general merchandise on its online Marketplace platform remained “roughly flat” in the quarter, sales in categories such as pets and beauty rose 30 percent, while sales in other categories such as furniture and sporting goods rose more than 20 percent rose percent on the year.

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