Wednesday, July 24, 2024

Walmart Lifts Guidance, Bucking Weaker Retail Trends. The stock rises.

Walmart shares rose on Thursday after the retailer reported first-quarter adjusted earnings that beat Wall Street expectations and raised its outlook for the fiscal year.

Walmart (ticker: WMT ) reported adjusted earnings of $1.47 per share on revenue of $152.3 billion. Analysts polled by FactSet had expected adjusted profit of $1.32 a share on revenue of $148.9 billion.

U.S. same-store sales rose 7.4%, beating analysts’ estimates of 5.5%.

“We had a strong quarter. E-commerce was up 26% and worldwide computer sales were strong,” Chief Executive Officer Doug McMillan said in the earnings release. “We used spending, expanded our operating range, and grew profits over sales.”

The retailer also raised guidance for fiscal 2024. The company now expects adjusted earnings of $6.10 to $6.20 per share. Analysts polled by FactSet expect fiscal 2024 earnings of $6.14. Revenue for this year is expected to increase by 3.5%.

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Guidance for the current quarter was below consensus. Walmart expects second-quarter earnings of $1.63 versus $1.68 per share. Analysts polled by FactSet had expected earnings of $1.71.

The stock rose 1.8% in premarket trading.

Before Walmart’s results, the retail earnings season was off to a muted start. Target ( TGT ) delivered better-than-expected earnings, though the big-box company sounded a note of caution with its guidance. and off-price retailer TJX Cos. ( TJX ) cut its second-quarter forecast. Both stocks zigzagged in their results.

Target and TJX’s focus is more on discretionary products like clothing, a category where inflation is pushing shoppers to spend more on essentials like food. Home Depot ( HD ) also noted weakness in discretionary sales when it reported results on Tuesday.

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In contrast, Walmart excels at selling essentials, earning its reputation as a highly defensive retailer.

That is, the company is not immune to changing costing methods. It hit a flat bottom last year, for example, when shoppers quickly stopped buying favorite items like clothing and home goods. The change forced the administration to drastically reduce guidance.

Walmart sounded the alarm again in February. The company issued a weak forecast that overshadowed its strong numbers, warning that its shoppers were feeling the pinch. Now, Walmart’s outlook is once again important to the stock.

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Investors are eager for information about how Walmart’s core low-income shoppers are doing.

“Looking forward, I believe Walmart will continue to gain market share in the food and grocery business as U.S. consumers flock to its stores amid the current economic backdrop of high inflation and recession fears,” Jesse Cohen, senior analyst at Investments.com, wrote Thursday.

Write to Teresa Rivas at [email protected] and Angela Palumbo at [email protected]

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