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Walmart Raises Its Outlook as Shoppers Look for Bargains


Walmart, the largest retailer in the United States, raised its annual guidance on Thursday, a sign that it expects shoppers to continue to gravitate toward its value-oriented stores as they have become more selective about their purchases.

The retailer said it expected net sales to increase 3.5 percent for the fiscal year and operating income to rise up to 4.5 percent.

Revenue in the first quarter was $152.3 billion, beating Wall Street’s estimate of $141.7 billion. Both the transactions and average amount customers spent rose in the quarter.

Higher-income households are continuing to shop more at Walmart, the company said, echoing a trend that its executives have called out in recent quarters. The retailer said it also gained market share in the grocery category.

“We had a strong quarter,” said Doug McMillon, Walmart’s chief executive, said in a statement on Thursday.

Retail earnings reports this week provided a glimpse into the mind-set of the American consumer and the state of the industry. Target, Home Depot and TJX, which owns T.J. Maxx and Marshalls, all reported first-quarter earnings that showed sales had moderated compared with the past few years when shoppers were spending more freely.

Home Depot on Tuesday lowered its full-year guidance and said sales in the first quarter declined 4.2 percent compared with the year before. Executives said they had expected 2023 would be a “year of moderation” for the home improvement sector, but the company’s performance was below expectations.

Target’s quarterly sales increased a modest 0.5 percent. The retailer maintained its full-year guidance, but said “based on softening sales trends” in the most recent quarter, it was planning for a wide range of sales outcomes in the second quarter.

Overall sales at T.J. Maxx’s parent company increased 3 percent. T.J. Maxx and Marshalls posted an increase, but sales at HomeGoods declined 7 percent. It maintained its full-year guidance and forecast an increase in sales of 2 to 3 percent.

Analysts said the sales declines were a sign of consumers being more selective about what they purchase, along with spending patterns gaining some semblance of normalcy after being less predictable during the pandemic. Broadly, the economy has remained resilient, with wage growth strong and jobs being added across a wide range of industry.

“We’re not seeing a collapse of revenue,” Simeon Siegel, managing director at BMO Capital Markets, said. “We’re seeing revenue disappointments. Consumers are still spending on the things that they decide they want to spend on.”

Retailers are facing a profit challenge. Walmart said on Thursday that its gross profit rate, or the difference between the cost of the goods and their sales, fell to 23.7 percent, slightly missing Wall Street’s estimates. The decline came in part because shoppers were buying more groceries and products in its health and wellness category and less general merchandise.

Target on Tuesday said its operating income fell 1.4 percent.

Retail analysts have expected that company margins would be thinner this quarter, given more promotions to entice shoppers to spend and customers buying more items like groceries that bring in lower profits.

That consumer behavior was reflected in this week’s retail sales report for April. Retail sales increased at a modest 0.4 percent compared with March, reversing a two-month decline. (The number is not adjusted for inflation and sometimes is revised.)

Department stores, health and personal care stores and grocery stores all recorded increases. Spending at furniture stores, electronic stores and home improvement retailers declined. Spending at restaurants and bars increased 14.5 percent.

Restaurants and flights are usually considered discretionary, but they are also experiences, which Americans are spending more on. There is less emphasis on purchasing big-ticket items for the home given that many shoppers spent the early stages of the pandemic doing just that.

“Part of what we’re experiencing now is a bit of a rebalancing in the consumer budget,” said Michelle Meyer, chief economist at Mastercard. “As we look forward, should we expect this split between experiences and goods to last forever? Of course not. But there’s still more catch up that needs to happen for some of these experience-based spending categories where consumers are still very eager to satisfy their lingering demand.”

Some analysts, though, are skeptical that consumer spending will remain resilient. Oren Klachkin, a lead U.S. economist at Oxford Economics, wrote in a note to clients that the April retail sales report showed that shoppers were being more selective.

“While the main engine of G.D.P. growth continues to hum, we see storm clouds gathering on the horizon,” Mr. Klachkin said. He expected a weaker labor market, consumers to have less savings, tightening credit and high prices that would make shoppers pull back on spending in the second half of the year.


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