Walmart has once again exceeded Wall Street's expectations, reporting a nearly 5% increase in quarterly revenue and raising its full-year outlook as it continues to draw in higher-income shoppers and boost its e-commerce presence. The retail giant's impressive performance underscores its resilience in a challenging economic environment, as it navigates the complexities of consumer behavior amidst persistent inflation.
In its fiscal second quarter, Walmart reported earnings per share of 67 cents, surpassing analysts' expectations of 65 cents. Revenue came in at $169.34 billion, also ahead of the anticipated $168.63 billion, marking a significant jump from $161.63 billion in the same period last year. Comparable sales for Walmart U.S. rose by 4.2%, excluding fuel, outpacing the 3.6% growth in transactions and the slight 0.6% increase in average ticket size compared to the previous year.
Walmart's CFO, John David Rainey, highlighted the company's strong first-half performance as the basis for its improved outlook, now expecting sales to rise by 3.75% to 4.75% for the full year. However, he cautioned that the second half of the year might not be as robust as anticipated, citing potential headwinds such as the 2024 election, unrest in the Middle East, and other global uncertainties that could affect consumer sentiment. "In this environment, it's responsible or prudent to be a little bit guarded with the outlook, but we're not projecting a recession," Rainey told CNBC.
Despite these cautionary notes, Walmart's customer base remains solid, with no noticeable shift in consumer behavior. Rainey observed that customers continue to prioritize essentials over discretionary items, a trend that has persisted throughout the year. Notably, sales of general merchandise, including lawn and garden supplies, turned positive for the first time in 11 quarters, signaling a potential uptick in consumer confidence.
The company's ability to attract a diverse range of income groups, including higher-income households, has been a key factor in its continued success. Walmart's value proposition, particularly in groceries, has drawn more visits to its stores and website, driving a 21% increase in global e-commerce sales and a 22% surge in the U.S. The introduction of its new private label grocery brand, Bettergoods, which offers items priced under $5, has further enhanced its appeal to cost-conscious shoppers.
Walmart's international business also performed well, with sales growing by 7.1% as the company expanded its store count and online presence. This global growth, combined with strong domestic performance, has helped Walmart maintain its competitive edge in a rapidly evolving retail landscape.
However, the company remains vigilant about the challenges ahead. The recent jobs report from the U.S. Department of Labor, which showed a slowdown in job growth and a rise in the unemployment rate, has raised concerns about the broader economy. Additionally, other retailers, such as Home Depot, have reported slow sales and consumer caution, even among higher-income shoppers, further underscoring the uncertainty in the retail sector.
Walmart has taken proactive steps to drive growth and maintain its market position. The company has expanded its third-party marketplace, increased its advertising sales, and grown its Walmart+ membership base. Rainey noted that the growing gap in price between food at home and food away from home, as highlighted by recent inflation data, is likely driving more consumers to prepare meals at home, benefiting Walmart's grocery business.
The retail giant's stock reflects its strong performance, with shares closing at $68.66 on Wednesday and up nearly 31% year-to-date, significantly outperforming the S&P 500's 14% gain.
