ShareNEW YORK: Walmart narrowly lifted its full-year forecast following solid quarterly results as it continued to navigate a market challenged by elevated pricing that has depressed demand for some goods.
The giant retailer, which emphasizes its strength as a value-oriented vendor, reported profits of $453 million. That compares with a loss of $1.8 billion in the 2022 period, which was hit by large costs tied to an opioid settlement.
The results come on the heels of a more than year-long period in which US households have been buffeted by the most acute period of consumer price inflation in a decade — a trend that appears to have abated after a series of Federal Reserve interest rate increases. Alluding to these dynamics, Chief Financial Officer John David Rainey said a tightening of credit and an erosion of the pandemic-era consumer balance sheets were reasons for a “cautious” outlook on the fourth quarter.
The giant retailer now expects full-year profits of between $6.40 to $6.48 per share, up from the prior range of $6.36 to $6.46 a share. Chief Executive Doug McMillon said Walmart enjoyed “strong revenue growth” in the third quarter and was “excited” by the upcoming holiday season, noting that the Thanksgiving meal will cost less than in 2022.
McMillon greeted the decline in prices in some consumer goods, such as eggs, chicken and seafood. But beef prices remain high, a sign “commodities will do what commodities will do,” he told analysts. “The pockets of disinflation we are seeing are helping, but we’d like to see more faster, especially in the dry grocery and consumables categories,” McMillon said.
Company revenues rose 5.2 percent to $160.8 billion, with more than two-thirds coming from Walmart’s US division, which scored a 4.9 percent jump in comparable sales. While that is still an impressive count, it is down from more than eight percent growth in the year-ago period.
Walmart bills itself as an affordable option for cash-strapped consumers, pointing to the benefits of tremendous economies of scale as the world’s biggest retail chain. The retailer garnered strong sales in groceries and pharmacy goods, offsetting weakness in discretionary items such as apparel, home and toys. Results during the quarter were also dented somewhat by elevated spending on store remodels.
During a conference call with analysts, McMillon acknowledged that the company “could have done a better job on expenses.” However, Walmart said it benefited from lower supply chain costs compared with the 2022 quarter, when it also heavily marked down merchandise due to oversupply.
Neil Saunders, managing director of GlobalData, described the results overall as “strong,” indicating that Walmart has succeeded in holding onto new customers drawn to its lower prices for groceries and household staples. “There was a fear that as inflation came down, Walmart would see the influx of customers dry up,” Saunders said in a note. “However, it is not working out that way as Americans remain pressured financially and are still looking to make their dollar stretch further — and Walmart is the place many have turned to.”
Saunders said a key challenge will be to get more customers to purchase general merchandise items like apparel and toys that have higher profit margins. He praised Walmart’s investments in store upgrades, saying the spending “will stand Walmart in good stead with core shoppers once the economy starts to improve and their spending power improves.” — AFP
