Walmart boosts outlook after strong quarter, shares surge
Annual adjusted profit per share forecast between $2.35 and $2.43
Annual consolidated net sales forecast to grow 3.75%-4.75%, up from 3%-4%
Average transactions rose 3.6% in second quarter, online sales up 22%
Quarterly earnings of 67 cents per share beat expectations
Adds details on category performance in paragraphs 5-7; analyst quotes in paragraph 8 and 10
By Siddharth Cavale and Savyata Mishra
Aug 15 (Reuters) -U.S. retailer Walmart WMT.N raised its sales and profit forecasts on Thursday for a second time this year, as Americans kept flocking to its stores for inexpensive essentials, sending its shares up more than 6% in premarket trading.
The world's largest retailer by sales is among the first major U.S. chains to report quarterly results that provide insight into how consumers are feeling, particularly after the government reported an unexpected deterioration in the labor market, raising fears of a recession.
Walmart's results suggest that despite several years of above-average inflation, consumer spending remains resilient. Inflation is now moderating, with U.S. consumer prices down in July, according to the U.S. Labor Department.
Walmart said its second-quarter sales were bolstered by strong demand for fresh food, particularly produce and high-quality meats. Customers also increased spending on personal care and beauty products, and when it came to health and wellness, they favored branded drugs over generics.
The company noted that higher-income customers, especially those earning over $100,000 annually, significantly contributed to sales of home furniture, appliances, clothing, and toys, leading to broad market-share gains in these categories.
These affluent shoppers have been drawn to Walmart's $98-per-year Walmart Plus subscription, which offers benefits such as unlimited free deliveries, curbside pickup, a Paramount+ streaming subscription, and a discount of 10 cents per gallon at its fuel stations.
The retailer reported a 16% increase in membership and other income during the quarter, which contributed to a 22% rise in U.S. online sales. Online sales were driven largely by a 50% rise in store-fulfilled deliveries, Walmart said.
"The U.S. consumer seems to be in a stable position relative to the start of this year, which is encouraging given concerns of a looming slowdown," CFRA Research analyst Arun Sundaram said.
Walmart's heft in grocery has largely shielded it from some broader economic pressures. The company has also strategically invested in store and merchandise upgrades, as well as services such as curbside pickup and delivery, allowing it to capture market share from competitors including Target TGT.N.
"Walmart's significant investments in pricing, store quality, technology, and supply chain have enabled the company to continue gaining market share, likely offsetting what we perceive as a slower-spending environment," said Scot Ciccarelli, an analyst at Truist Securities.
Target, whose shares were up 3% in premarket trade, reports its quarterly results next Wednesday.
Walmart forecast annual adjusted profit per share to be between $2.35 and $2.43, compared with its prior expectations to potentially better or be at the high end of a range of $2.23 to $2.37 per share.
Fiscal 2025 consolidated net sales is now forecast to grow in the range of 3.75% to 4.75% from a prior range of 3% to 4% growth.
The company posted second-quarter earnings of 67 cents per share, beating analysts' expectations for 65 cents, according to LSEG. Its overall revenue rose 4.8% to $169.3 billion, beating Wall Street forecasts of $168.53 billion.
Walmart shares were up 6.4% at $73.07 in premarket trading and were on track to open at a record high. The blue-chip stock has climbed 30.7% so far in 2024, outperforming the S&P 500's .SPX 14.4% rise.
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Reporting by Siddharth Cavale in New York and Savyata Mishra in Bengaluru; Editing by Rod Nickel
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