Customers outside a Walmart store on Sunday, May 15, 2022 in Torrance, California, US. Walmart Inc. Is going to release earnings figures on 17 May.
Walmart said Tuesday that sales rose nearly 9% in the fiscal third quarter as Americans across income levels bought the company’s lower-priced groceries.
The discounter beat Wall Street’s expectations for the quarter and raised its outlook to reflect that beat.
Shares rose more than 6% in premarket trading.
According to Retinitis, Walmart reported for the three-month period ended October 31:
- Earnings per share: $1.50 adjusted versus $1.32 expected
- Revenue: $152.81 billion vs. $147.75 billion expected
Walmart reported a net loss of $1.8 billion, or 66 cents per share, down from a profit of $3.11 billion, or $1.11 per share, a year earlier.
On an adjusted basis, the company reported earnings per share of $1.50. The retailer, which also provides pharmacy services, recorded a charge of approximately $3.33 billion, or $1.05 per share, as part of legal charges related to opioids. It announced a $3.1 billion nationwide settlement Tuesday to resolve lawsuits and potential lawsuits by state, local and tribal governments.
“It vigorously contests the allegations in these matters, and this settlement structure does not include any admission of liability,” Walmart said in a statement.
‘Pocketbooks are stretched’
Shoppers are watching how they spend, said John David Rainey, Walmart’s chief financial officer. They are buying less expensive proteins like hot dogs, beans and peanut butter instead of expensive meats. They are waiting for sale events to buy items like TVs and air fryers and are spending less in apparel and home categories.
“Pocketbooks are stretched,” he said. “People have less discretionary income or less disposable income to spend on things – and so they’re looking for value.”
The discounter also made progress with an industry-wide headache: gluts of excess inventory. Walmart’s inventory rose 13% year over year in the third quarter. This is down from 25% in the second quarter and 32% in the first quarter.
Rainey said Walmart has canceled orders, increased markdowns and cleared backlogs of goods stuck at ports. He said about 70% of the inventory increase is from inflation rather than more units.
“From a unit perspective, we find ourselves in a much, much better place than we did in the first part of the year,” he said.
Walmart US Comparable sales excluding fuel grew 8.2%. That topped analysts’ expectations for 3.6% growth, according to StreetAccount. The key retail metric includes sales at Walmart stores and clubs open for at least one year, including remodels, relocations and expansions.
Gearing up for the holidays
Walmart is navigating a more challenging backdrop as it prepares for the holidays. Inflation is near a four-decade high, pushing up housing, gas and other prices. Competitors are waiting to heavily discount in order to try to clear through excess inventory. And consumers are spending again on travel, dining out and other experiences.
As inflation rises, so has the big-box retailer attracted shoppers with higher incomes. Rennie said that about 75% of its market share in food came from households that make more than $100,000 a year. The discounter saw the same pattern last quarter.
For the holiday quarter, Walmart took a more conservative outlook. It said it anticipates that comparable sales for Walmart US would have increased by about 3% excluding fuel. That fell short of Wall Street’s expectations for 3.5% growth, according to StreetAccount.
Walmart said it expects fourth-quarter adjusted earnings per share to decline 3% to 5% and consolidated net sales to increase by about 3%, as it recovers from currency fluctuations of approximately $1.3 billion. negatively affected.
So far, Rainey said the holidays are “off to a pretty solid start,” but “consumers are exercising discretion in terms of what they’re buying.”
