Walmart raised its forecast on Tuesday, as its customers bought more discretionary goods, ordered more home deliveries and started holiday shopping.
The discounter now expects net sales to grow between 4.8% and 5.1% for the full year. This compares with its previous forecast for sales growth of between 3.75% to 4.75% for the period. The latest outlook comes after Walmart posted third-quarter revenue and earnings that beat expectations.
In a CNBC interview, Chief Financial Officer John David Rainey He said sales of general merchandise — outside the grocery department — rose for the second consecutive quarter after 11 straight quarters of decline. Still, he said consumers are waiting to make those purchases until they see a great deal, especially when they pay more for food.
“We’re expecting this holiday period to be very consistent with that,” he said. “They’re focused on price and value.”
According to LSEG’s survey of analysts, what the big-box retailer reported for the period compared to Wall Street estimates:
- Earnings per share: 58 cents adjusted vs. 53 cents expected
- Income: $169.59 billion vs. $167.72 billion expected
In the three-month period ended Oct. 31, Walmart’s net income increased. $4.58 billion, or 57 cents per share, compared with $453 million, or 6 cents per share, in the year-ago period. Revenue rose from $160.80 billion in the year-ago quarter.
Comparable sales, an industry metric also known as same-store sales, were up 5.3% for Walmart and 7% at Sam’s Club, excluding fuel.
Consumers visited Walmart’s stores and website in the U.S. more and tended to spend more than in the year-ago quarter. Walmart US transactions increased 3.1%, and the average ticket increased 2.1% year-over-year.
E-commerce sales in the U.S. grew 22 percent, driven by gains from curbside pickup and home delivery, as well as growth in Walmart’s advertising and third-party marketplace business.
Walmart shoppers are also willing to pay more to get their purchases faster, Rainey said. For the past two quarters, 30% of consumer orders in the U.S. have come with an additional fee to receive delivery within a shorter time frame, such as within one hour or within three hours.
Walmart’s e-commerce business is “getting very close to profitability because we’re able to leverage some of the cost of delivery with the additional fees that customers are willing to pay for the convenience,” he said.
Walmart, the nation’s largest retailer, presented its latest sales results and U.S. consumer readings as investors gauge sentiment and weigh the outlook for the year’s most important shopping season.
Retailers, including Walmart, are contending with a mixed bag of factors this holiday season. Inflation has moderated with gas prices falling and grocery inflation remaining low year-over-year. Fears of a drawn-out process to determine the winner of the US presidential race never materialized.
Still, President-elect Donald Trump’s proposed tariffs on imports from China and other countries have fueled fresh fears about rising prices again. The holiday season is also shorter this year and parts of the U.S. have had unseasonably warm weather, two dynamics that could hurt retailers.
Rainey said the tariffs could force Walmart to raise prices, but said it was too early to say which items might be more expensive.
“We never want to increase prices,” he said. “Our model consists of everyday low prices. But there will probably be cases when prices for consumers go up.”
About two-thirds of the goods Walmart sells are made, grown or assembled in the U.S., reducing the risk of tariffs on those goods, he said. And he added that Walmart, like other retailers, is trying to diversify where it imports goods.
“We’ve been living in a tariff environment for seven years, so we’re quite familiar with it,” he said. “The tariff, though, is inflationary for consumers, so we want to work with suppliers and our private brand assortment to try to lower prices.”
Holiday spending is expected to increase this year, but at a modest rate. The National Retail Federation, a retail trade group, said it expects holiday spending in November and December to rise 2.5 percent to 3.5 percent over 2023, to between $979.5 billion and $989 billion. That would be less than the 3.9% year-over-year jump from the 2022 to 2023 holiday season, when total spending was $955.6 billion.
Rainey said the holiday season is “off to a great start.”
He said that items like TVs, Apple Airpods, Beats headphones and tires are being sold. On the other hand, unseasonably warm weather in some parts of the country has slowed pace for clothes and other weather-dependent purchases like space heaters.
He said some of the general gains in merchandise reflected consumer relief from inflation, but some also had to do with Walmart’s strategy. The company has deepened its assortment of toys, home goods and more through its third-party marketplace.
As of Monday’s close, Walmart shares have gained nearly 60% this year, outpacing the S&P 500’s roughly 24% gain over the same period. Walmart stock closed Monday at $84.08, giving the company a market value of $675.86 billion.
