Walmart Reports Another Solid Quarter As Consumers Focus On Value

Walmart raised its full-year forecast on Thursday as it posted another quarter of solid results, grabbing market share in groceries and other staples against a backdrop of inflationary pressures.

The big retailer, which has been seen as well positioned amid a period of pricing pressure because of its reputation for value, enjoyed another quarter of growing sales at its namesake US stores.

Walmart reported second-quarter profits of $7.9 billion, up 53 percent from the year-ago period, a period marred by excess inventories due in part to pandemic supply chain issues.

Revenues rose 5.7 percent to $161.6 billion.

Although inflation has retreated somewhat from the levels of a year ago, executives described the US consumer as discriminating, having shifted behaviors compared with pre-pandemic life.

Shoppers are preparing more meals at home, which not only supports demand for groceries, but also lifts sales of kitchen tools such as hand blenders and mixers, executives said.

The chain has also seen an uptick of its Walmart-branded items for household staples such as mustard and potato chips, which have lower sticker price compared with other offerings.

"Customers are stretching their dollars further and sticking better value across more categories," said Chief Financial Officer John David Rainey on a conference call with analysts .

But Rainey said that customers are still showing a willingness to spend on special occasions.

"Consumers are not compromising on some of the holiday seasons," he said. "Around July 4th and some of the holidays... they're showing a willingness to spend and our team is leaning into that."

Walmart's US division -- which accounted for more than two-thirds of revenues during the quarter -- jumped 6.4 percent in comparable sales, a closely watched industry data point.

The business won market share gains in groceries, higher prescription counts and benefited from price hikes on some goods. On the downside, Walmart also cited "softness" in discretionary areas including apparel, home and sporting goods.

Higher sales also helped offset the hit from increased spending on employee wages.

Chief Executive Doug McMillon described consumers as "resilient," adding that he was encouraged by recent sales trends in the United States in "back to school" promotions, a season that often correlates with other key retail occasions, such as Halloween and the winter festive season.

Executives highlighted increased investment in e-commerce and distribution initiatives to make shopping more convenient.

McMillon spoke optimistically of artificial intelligence as a "great opportunity" for Walmart because of the greater potential to personalize for customers.

"There's a great opportunity for us to be more anticipatory and to be more relevant to them and communicate in a way that shows that we know who they are while protecting privacy," he said.

Walmart lifted full-year projections and now sees full-year earnings of between $6.36 and $6.46 a share, up 26 cents from the prior range.

Neil Saunders, analyst at GlobalData Retail, called the results "excellent" given the challenges facing the retail sector.

"Inflation and more challenging economic finances made many take a second look at Walmart, but Walmart's ongoing improvements to its range and shopping experience have made them stick around," Saunders said in a note.

Shares rose 0.6 percent to $160.25 in early trading.