Walmart beats lowered profit estimates, boosts forecast

Bloomberg

Walmart Inc surged the most in almost two years as a less-dire profit forecast signalled that the retail giant is finding its footing after slashing its outlook three weeks ago.
Results improved more than expected in July thanks to robust back-to-school sales, lower fuel prices and more buying by wealthier customers seeking bargains, Walmart CEO Doug McMillon said. The company has slowed inventory growth and will be well positioned for the holiday season, he said.
Walmart’s upbeat tone suggested it’s making progress in adapting to changing consumer-spending habits after a cut to its profit forecast that shook investors and spurred fears of a broader economic downturn. Soaring US inflation is forcing shoppers to pay more for essentials, eroding sales of more
profitable items and prompting Walmart to mark down prices of apparel and other goods.
“We certainly hope to put the pressures that we’ve had in the first half behind us as quickly as we can,” McMillon told analysts after the company reported quarterly results and said annual profit would fall a little less sharply than expected.
“But as you can see in our guidance, we acknowledge reality” as US consumers contend with rising prices.
Wall Street analysts breathed a sigh of relief after Walmart’s jarring warning last month. The retailer’s earnings report for its fiscal second quarter was a “classic ‘beat the guide-down,’” said Michael Baker, an analyst at DA Davidson. Results were “better than feared,” said Rupesh Parikh of Oppenheimer & Co.
Shoppers are looking to scrimp by buying more store-brand goods and spurning higher-end deli meats for hot dogs and canned tuna. In the US, e-commerce sales growth rose 12% in the second quarter, up from a 1% pace in the first quarter, Walmart said.
“Higher-income families are shopping at Walmart because they’re so price-sensitive right now,” McMillon said.
“Families making more than $100,000 in household income have driven a lot of our growth during this last quarter.”
The retailer said it has been adding customers to its Walmart+ membership program. A streaming deal announced Monday between Walmart+ and Paramount Global will provide another boost since customers had been pressing for entertainment options, said John Furner, head of the company’s US operations. The global advertising business expanded almost 30%, Walmart said.
While wage pressures will linger, the company has made progress in reining in supply-chain costs, McMillon said.