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(Reuters) -Walmart Inc raised its full-year forecasts and beat second-quarter sales and profit estimates on Thursday, citing strong demand for its low-priced groceries and health and wellness products.
Shares in Walmart (NYSE:WMT), which have climbed 12.3% this year, were up about 3% in premarket trading.
“The reports of the death of the U.S. consumer are greatly exaggerated … The earnings report from the world’s largest retailer certainly checked all the boxes,” Art Hogan, chief market strategist at B Riley Wealth, said.
“The strong report also bodes well for the back-to-school, and holiday shopping seasons,” he added.
Sales at Walmart’s U.S. stores open at least a year rose 6.4%, excluding fuel, in the three months ended July 31, beating estimates of a 4.44% increase, according to Refinitiv data.
This was mainly driven by high-single-digit growth in grocery and high-teens growth in health and wellness products, including weight loss inducing diabetes drugs, such as Ozempic. General merchandise sales in the United States declined in the quarter, but the performance was better than the prior quarter, with back-to-school categories performing well.
U.S. retail sales for July increased more than expected as Americans boosted online purchases and dined out more, suggesting the economy continued to expand early in the third quarter despite a succession of interest rate hikes to bring down inflation.
Walmart’s average transactions in the U.S. rose 2.9%, while average receipts increased 3.4%, the company said.
However, Walmart Chief Financial Officer John David Rainey, sounded a note of caution, saying Americans may still see a hit to their spending power in the coming year to 18 months, due to rising energy costs and the resumption of student loan payments in October.
“I don’t want to declare that we are out of the woods here. There is reason to be cautious for the consumer.”
Smaller rival Target on Wednesday beat quarterly profit estimates, benefiting from leaner inventory, but in contrast to Walmart, cut its forecast for the year.
Walmart expects fiscal 2024 earnings to be in the range of $6.36 per share to $6.46 per share, above its prior forecast of $6.10 to $6.20. Analysts on average were estimating $6.28 per share, according to Refinitiv IBES data.
The company also expects net sales to rise about 4% to 4.5%, from 3.5% earlier. Operating income rose 6.7% to $7.32 billion in the quarter, while it reported adjusted earnings per share of $1.84, beating expectations of $1.71 per share.
Online sales rose 24% in the second quarter, mainly driven by double-digit growth in store-fulfilled pickup and delivery.
The company’s global advertising business, called Walmart Connect, rose 35%.
