Walmart’s strong first quarter driven by consumers seeking bargains

A worker carries bananas inside the Walmart Supercenter on Feb. 9, 2023, in North Bergen, New Jersey. Walmart reports earnings on Thursday, May 17, 2024. (AP Photo/Eduardo Munoz Alvarez, File)

NEW YORK  — Walmart Inc. reported another quarter of strong quarterly results Thursday as its low prices pull in shoppers scouring for discounts with inflation stubbornly high.

The nation’s largest retailer, based in Bentonville, Arkansas, also offered an upbeat outlook. Share rose more than 5 percent in premarket trading.

Walmart, based in Bentonville, Arkansas, is among the first major U.S. retailers to report quarterly results that could shed more insight into how consumers are feeling, particularly after the government reported an unexpected flattening of spending between March and April.

Americans have remained largely resilient in the face of inflation, bolstered by a strong labor market and steady wages. But there are signs that shoppers are pulling back under the growing weight of higher prices and the higher costs of carrying debt.

READ: Despite a seemingly healthy economy, low-income spenders show the strain

While the inflation rate has ebbed prices remain elevated for some basic items like packaged goods and rents remain high, sapping the spending power of millions of people.

Walmart said that its customers are spending more on necessities while cutting back on discretionary goods like home furnishings. But it’s been issuing price rollbacks and that is keeping store traffic strong.

Walmart is also drawing households with income exceeding $100,000 a year and has focused on spiffing up its home and fashion goods so it can keep them.

Price rollbacks

“Our combination of everyday low prices plus a large number of rollbacks is resonating,” CEO Doug McMillon told investors on a call Thursday.

Home Depot, the nation’s largest home improvement retailer, said this week that sales declined for the third consecutive quarter to start 2024 as homeowners and prospective buyers wrestled with higher mortgage rates and inflation.

Starbucks last month lowered its sales expectations for the year as visits to its coffee shops slowed worldwide. The decline in spending at U.S. stores was even worse than it had anticipated.

READ: US retail sales missed expectations in April

Walmart has launched new initiatives as it faces increasing pressure to rev up sales with Amazon becoming a growing threat.

This month, Walmart launched its biggest store-label food brand in 20 years in terms of the breadth of items, hoping to reach younger customers who are not loyal to grocery brands and want foods that are more affordably priced.

The brand, called Bettergoods, is just hitting Walmart stores and the company’s online shopping site. Walmart said it expects to have 300 products in the line by the fall ranging from frozen foods and dairy to coffee and chocolate.

Walmart also announced in February it was buying smart TV maker Vizio for $2.3 billion to boost its advertising business. The deal gives Walmart access to Vizio’s SmartCast operating system, which will allow Walmart to offer its suppliers the ability to display ads on streaming devices.

But Walmart is scaling back in areas where it has not done well and said last month that it would close its health centers and virtual care service.

Profits hit $5.10B

Walmart reported profits of $5.10 billion, or 63 cents per share for the quarter that ended April 30. That compares with $1.67 billion, or 21 cents per share, in the same period last year. Adjusted earnings per share was 60 cents, far surpassing estimates for 53 cents per share, according to FactSet analysts.

Revenue rose 6 percent to $161.51 billion in the quarter, up from $152.3 billion in the year-ago quarter. Analysts expected $159.6 billion, according to FactSet.

Comparable store sales — those from established stores and online operating over the past 12 months — rose 3.8 percent at Walmart’s U.S. stores, a bit slower than the 4 percent, in the fourth quarter. The metric rose 4.9 percent in the fiscal third quarter. Global e-commerce sales were up 21 percent in the latest quarter, compared with 23 percent during the fourth quarter and 15 percent in the previous quarter.

The average ticket— how much shoppers spent per trip — was unchanged in the latest quarter from a year ago, even as the number of transactions rose 3.8 percent.

Walmart said it expects sales for the current year to be at the high end or slightly above the company’s prior guidance of 3 percent to 4 percent. It also expects adjusted profit per share to be at the high end or slightly above its prior projection of $2.23 to $2.37.