Walmart Hits Record High, Raises Full-Year Forecast on Strong Q1 Performance

Walmart Q1 Performance Highlights and Full-Year Forecast Update: Walmart raised its full-year sales and profit forecast following strong Q1 results

Full-Year Forecast Raised:

Walmart raised its full-year sales and profit forecast following strong Q1 results. The retailer experienced robust sales in both groceries and non-essential items such as clothing and electronics.

Stock Surge:

Announcement led to a 7.3% increase in Walmart's stock, reaching $64.22 per share. The stock valuation now exceeds 25 times expected earnings, up from the 10-year average of 20 times earnings (LSEG data).

Investor Confidence:

Strong Q1 performance eased investor concerns regarding potential declines in US consumer spending. Analyst Joseph Feldman of Telsey Advisory Group praised the quarter, highlighting its exceptional performance.

US Comparable Sales Growth:

For the quarter ending April 30, Walmart's US comparable sales (excluding fuel) rose by 3.9%, surpassing the 3.15% expected by analysts. This growth was attributed to increased average transactions and higher traffic both online and in-store.

Inflation Impact:

CFO John David Rainey noted a 0.4% inflation increase in Walmart’s product range during the quarter. This inflation rate is expected to persist through the rest of the year.

Category Performance:

Strong unit growth observed in apparel, jewelry, home goods, automotive items, and consumer electronics. Online sales in the US increased by 22%, outperforming the 17% growth during the holiday season.

Digital and High-Income Consumer Contribution:

Online sales growth was driven by Walmart's pickup and delivery services and its third-party marketplace, which now offers over 420 million items. Households earning over $100,000 annually significantly contributed to the increase in online sales.

Spending Patterns:

Chief economist Brian Jacobsen of Annex Wealth Management noted that the sales rise was volume-driven rather than price-driven, primarily fueled by wealthier consumers.

Lower-income consumers maintained spending but increasingly opted for cheaper alternatives.

Consumer Behavior:

More customers are cooking at home instead of dining out, influenced by a 45% increase in rollbacks on food and consumables in April. This trend highlights a shift towards budget-conscious shopping among lower-income consumers amidst ongoing inflation.

Market Share and Competition:

Telsey analyst Feldman suggested that Walmart’s strong performance might challenge other retailers, indicating market share gains. This assertion comes ahead of Target's earnings report scheduled for May 22.

Financial Performance:

Q1 adjusted earnings were 60 cents per share, exceeding the 52 cents forecasted. Total revenue reached $161.51 billion, surpassing expectations.

Outlook:

Walmart projects annual consolidated net sales growth at the higher end or slightly above the previous estimate of 3% to 4%. Adjusted profit per share is also expected to be at the higher end or slightly above the prior forecast of $2.23 to $2.37.