Walmart defied rivals Home Depot and Target this week by reporting better-than-expected earnings for the three months that ended in April. As a result, Walmart increased its full-year forecasts.
According to Walmart CEO Doug McMillon, “stubborn inflation” in dry goods and consumables was still putting a strain on some families and casting doubt on the outlook for the second half of the year.
Resilience at Headline Level
According to John David Rainey, the group’s chief financial officer, food prices were still more than 20% higher than they were two years earlier, despite a 4 percentage point decline in the headline inflation rate for food and consumables over the quarter.
In line with statements made earlier this week by Home Depot and Target regarding sluggish discretionary spending, Rainey stated, “Consumer spending has demonstrated resilience at the headline level, but below the surface, we continue to see signs that customers remain choiceful, particularly in discretionary categories.”
Walmart raises full-year outlook as first-quarter sales top expectations;
Upbeat Account of Growth
However, compared to its competitors, Walmart presented a more upbeat account of growth during the quarter and its projections for the remainder of the year. The largest retailer in the world increased its full-year projections, now projecting 3.5% sales growth rather than the 2.5 to 3% guidance it had reiterated last month. It has raised its previously stated range of adjusted earnings expectations from $5.90 to $6.05 to $6.10 to $6.20 per share.
Without taking into account currency fluctuations, revenues for the first quarter of its fiscal year increased 7.7% to $152 billion, with e-commerce sales increasing by 26%. Operating expense reductions assisted in offsetting the change in spending from luxury goods to more profitable general products, resulting in adjusted earnings per share rising by 13% to $1.47, exceeding the $1.25 to $1.30 range that had been anticipated by investors.