Walmart surges to record high, lifts full-year forecast with strong Q1 results

Walmart raised its full-year sales and profit forecast after reporting impressive first-quarter results on Thursday, driven by strong sales of groceries and non-essential items such as clothing and electronics.

This announcement has pushed Walmart's shares to a record high.

In early trading, Walmart's stock climbed by 7.3 per cent to reach $64.22 per share, pushing its valuation to over 25 times the expected earnings.

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This is an increase from its 10-year average valuation of about 20 times earnings, according to data from LSEG.

The retailer’s performance has relieved some concerns among investors about the possible decline in US consumer spending.

Reuters cited Joseph Feldman, an analyst at Telsey Advisory Group, who said, "it's about as good a quarter as I can remember," underlining the strength of Walmart's recent performance.

For the quarter ending April 30, Walmart's total US comparable sales, excluding fuel, rose by 3.9 per cent, surpassing analysts' expectations of a 3.15 per cent increase.

This growth was brought about by a similar rise in average transactions, indicating a higher volume of online and in-store traffic, with customers purchasing more items per trip.

During the post-earnings call, Walmart's CFO John David Rainey mentioned that inflation for their product range had increased by about 0.4 per cent in the quarter.

According to him, this level of inflation may continue for the rest of the year.

Rainey remains optimistic about the apparel, jewellery, home goods, automotive items, and consumer electronics categories, citing considerable unit growth in these areas.

Online sales in the US have increased by 22 per cent, outperforming the 17 per cent growth seen during the typically busy holiday season.

This increase was fostered by Walmart's pickup and delivery services, as well as its third-party marketplace, which now features over 420 million items.

Notably, households earning more than $100,000 per year contributed to this online sales growth.

Brian Jacobsen, chief economist at Annex Wealth Management, pointed out that the rise in sales was volume-driven rather than price-driven, noting that wealthier consumers were primarily responsible for this increase.

He also highlighted that lower-income consumers, while maintaining their spending levels, are increasingly seeking cheaper options.

Walmart observed that more customers are preparing meals at home instead of dining out, a trend influenced by the 45 per cent increase in rollbacks on food and consumables offered in April.

This shift towards more budget-conscious shopping behaviour among lower-income consumers has been notable amidst the ongoing inflationary pressures.

Telsey analyst Feldman suggested that Walmart's strong results might spell trouble for other retailers, indicating that Walmart is gaining market share.

This claim comes ahead of Target's earnings report, scheduled for May 22.

Walmart's first-quarter adjusted earnings reached 60 cents per share, surpassing the average forecast of 52 cents.

The company also reported total revenue of $161.51 billion, exceeding expectations.

Looking forward, Walmart now projects its annual consolidated net sales to grow at the higher end or slightly above its previous estimate of 3 per cent to 4 per cent, with adjusted profit per share also expected to be at the higher end or slightly above the prior forecast of $2.23 to $2.37.

(With inputs from Reuters)