Walmart Inc. showcased resilience with higher-than-anticipated sales in its fiscal third quarter, but the retail giant’s cautious outlook sent its shares tumbling. Despite beating Wall Street’s earnings estimates and witnessing a rise in sales, Walmart’s careful stance reflects a broader concern over changing consumer spending patterns as the holiday season approaches.
Walmart’s mixed financial report comes after the company’s shares hit a record high, only to fall by over 7% in early trading. The retailer’s forecast for the year was marginally below expectations, with adjusted earnings per share projected at $6.40 to $6.48 against analysts’ predictions of $6.48. Nonetheless, this outlook improved from previous estimates, alongside an anticipated 5% to 5.5% rise in consolidated net sales.
CEO Doug McMillon noted on the earnings call that inflationary pressures are easing, with some product categories experiencing deflation. This trend could relieve Walmart’s customers during the gift-buying season despite potentially impacting sales negatively. McMillon expressed a welcome stance toward deflation, citing its benefits for customers.
CFO John David Rainey highlighted in a CNBC interview that while promotional events like Halloween fared well, a noticeable dip in consumer purchasing sandwiching these events prompted a reassessment of consumer health. Nonetheless, early holiday promotions have shown positive signs, with categories like clothing gaining traction.
The third-quarter results exceeded analyst expectations, with adjusted earnings per share of $1.53 and revenue of $160.80 billion. This performance marks a significant turnaround from the previous year’s loss, driven by strong grocery sales and digital growth. Walmart U.S. and Sam’s Club reported increased comparable sales and customer transactions also saw a healthy uptick.
In addition to traditional revenue streams, Walmart is diversifying with its advertising arm, Walmart Connect, and its membership program, Walmart+, both showing promising growth.
As the end-of-year festivities draw near, Walmart’s position as the leading national grocer puts it in a solid position to meet consumer demands. However, the cautious outlook amid dynamic consumer behaviour and economic variables suggests that the road ahead might have challenges that even a retail behemoth like Walmart cannot entirely predict or control.