Walmart (WMT.N) raised its full-year outlook and delivered quarterly results that surpassed expectations on Thursday. The company is betting that easing inflation will boost sales of groceries and non-essential items like clothing and electronics, propelling its shares to a record high with the largest single-day gain in four years.
While several U.S. retailers have recently expressed concerns about declining consumer spending, Walmart remains optimistic. The largest U.S. retailer projected a positive outlook on Thursday, sending its shares up 7% to a record high of $64.22 before closing it at $64.01 up 6.99%. This rally marked Walmart's most significant one-day stock gain since March 2020 and contributed to lifting the Dow industrials (DJI) past the 40,000 mark for the first time.
In April, U.S. consumer prices rose less than expected, although domestic demand has shown signs of cooling due to higher costs for rents, gas, and car insurance. The consumer price index increased by 3.4% over the 12 months through April, according to the Bureau of Labor Statistics, significantly lower than the 9.1% peak in June 2022.
Walmart's online sales in the United States surged by 22%, surpassing the 17% growth observed during the typically strong holiday season. This growth was driven by Walmart's pickup and delivery services and increased sales of items such as apparel for men, women, and children through its third-party marketplace, which now offers over 420 million discretionary products. Walmart attributed much of this online growth to households earning more than $100,000 annually.
Despite higher prices, Americans have generally managed to cope, although prolonged inflation has raised concerns that lower-income consumers might struggle more and potentially slow down a recovery in spending. Walmart executives noted that while lower-income consumers maintained their spending habits, they tended to opt for less expensive items. They also highlighted that the price gap between eating at home and dining out had widened, boosting Walmart's grocery business, which accounts for about 60% of total revenues.
In April, a 45% increase in the number of discounted food and consumable items, known as rollbacks, resonated strongly with shoppers. Walmart reported first-quarter adjusted earnings of 60 cents per share, easily beating the 52-cent average forecast, with total revenue of $161.51 billion exceeding estimates.
For its fiscal year ending January 2025, Walmart expects sales to rise at the high end or slightly above its previous forecast of 3% to 4% growth, with adjusted profit per share also at the high end or slightly above the prior estimate of $2.23 to $2.37.