Here we are headed for the tail end of summer and in the thick of earnings season with plenty of retailers already checked in with quarterly results and some still have yet to do so. This past week, superstore Walmart’s
WMT
Walmart has long been a key player in helping consumers offset other costs incurred. In 2023, inflation took center stage and has served as a catalyst for the company since more customers are seeking it out.
Earlier this month, a report by Placer.ai noted that Walmart was, “seeing significant visit increases in certain states, indicating that America’s largest retailer still has growth potential and that the wider superstore category is still very attractive to 2023 consumers.” Placer.ai also wrote that Walmart outperformed its superstore peers on a year-over-year visit basis in both June and July, “perhaps thanks to an increase in shoppers trading down and looking to strengthen their budgets in the face of inflation,” wrote the team at Placer.ai.
On August 17, Walmart reported both an earnings-per-share and revenue beat and raised its outlook for 2023. Total sales grew to $161.6 billion, ahead of FactSet’s estimate of $160 billion.
In the company’s earnings call, CEO Doug McMillon said, “We had another strong quarter. We’re gaining share across markets and formats, growing units sold, transaction counts are positive across markets and growth in operating income is outpacing sales.” One key trend Walmart has benefited from over the past handful of months is the influx of new and sometimes higher-end shoppers seeking it out during the current economic environment.
Responding overall to the results, Oliver Chen and the team at TD Cowen wrote “[Walmart] outlined a resilient yet discerning consumer who is increasingly eating at home, purchasing private label, and spending in seasonal moments.”
They have a point. For its U.S. division, which made up 68.6% of Walmarts sales in the quarter, Health & Wellness and Grocery categories were up. These results weren’t lost on any analysts, including Neil Saunders, managing director of GlobalData. In his response to earnings, Saunders cautioned, “there is still a big reluctance among newer shoppers, some of whom have money to burn, to cross the aisle from groceries into non-food. In our view, Walmart still has a lot of work to do in improving its general merchandise offer, particularly from a merchandising and presentational standpoint.”
McMillon also pointed to what is on the horizon for Walmart. “We’re a people-led, tech-powered, omnichannel retailer dedicated to helping people save money and live better. We like who we are and we like who we are becoming. We’re positioned for growth. We can serve people how they want to be served whether that’s in a store club, picking up an order curbside or having it delivered. We continue to grow some of our newer businesses which shape the overall model in a positive way, helping to enable us to grow profit faster than sales.”
Joseph Feldman and team at Telsey Advisory Group agreed. “Overall, Walmart continues to expand its vision beyond retail and e-commerce, with a focus on building a powerful ecosystem, including advertising, merchant services, last mile delivery, health services, and digital payments,” wrote the team. “These new elements of the ecosystem are more profitable than traditional retail and collectively should strengthen Walmart’s relationship with customers and generate profitable market share.”
The past quarter’s strong results and the optimistic forecast have me wondering if the momentum we’re seeing at Walmart is a brief spike or more of a permanent fixture. Stay tuned and find out.
Walmart will report its next round of earnings on November 16 ahead of the market open.
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