Walmart (WMT) earnings Q2 2024

walmart on Thursday raised its full-year forecast as the discount store relied on its low-price reputation to attract grocery customers and boost online spending.

The big retailer beat Wall Street sales and earnings expectations. Walmart US e-commerce sales also increased 24%.

Walmart said it now expects full fiscal year consolidated net sales to rise between 4% and 4.5%. It said adjusted earnings per share for the year will range from $6.36 to $6.46. That compares with its previous guidance for consolidated net sales earnings of 3.5% and an adjusted earnings per share range of $6.10 to $6.20.

In an interview with CNBC, Chief Financial Officer John David Rainey said Walmart saw a “modest improvement” in sales of high-priced and discretionary items, such as electronics and household items, during the quarter. Sales of those products have been weaker for more than a year as Americans spend more on necessities like food.

He said he feels better about spending patterns than he did three months ago. However, he described the consumer as “choice or discerning.” He said seasonal times, like the July 4 holiday and back to school, have helped boost sales.

Shares of the company closed more than 2% lower on Thursday.

Here’s what the company reported for the three-month period ending July 31 compared to what analysts were expecting, based on Refinitiv Consensus Estimates:

• Earnings Per Share: Adjusted $1.84 vs. Expected $1.71
• Revenue: $161.630 million vs. $160.270 million expected

Walmart’s net income for the fiscal second quarter increased 53% to $7.89 billion, or $2.92 per share, compared to $5.15 billion, or $1.88 per share a year earlier.

Customers visited Walmart’s stores and website more often and bought more when they did. Transactions increased 2.9% and average ticket increased 3.4% for Walmart US.

Walmart US same-store sales grew 6.4% in the second quarter, excluding fuel, compared to the same period a year earlier. That’s higher than the 4.1% rise analysts were expecting, according to FactSet.

At Sam’s Club, same store sales increased 5.5%, excluding fuel, in line with analysts’ expectations.

Walmart’s online sales in the US grew as customers bought more items from the company’s growing third-party marketplace and placed more orders for store pickup and delivery.

“It really shows that Walmart’s value proposition is about much more than low prices or value. Today it’s about convenience,” Rainey said. “And so we’re leaning heavily into that and really into both aspects of this part of our business.”

Walmart has also gained momentum with new revenue streams, including selling more ads and convincing more shoppers to sign up for its membership program, Walmart+. Those higher-margin businesses are one of the main reasons CEO Doug McMillon has said he expects profit to grow faster than sales over the next five years.

That upward trajectory continued in the most recent quarter. Sales of Walmart Connect, the company’s advertising business in the US, grew 36% year-over-year.

Also this week, Walmart announced changes to its leadership ranks. On Wednesday, he said Walmart International CEO Judith McKenna, a 27-year veteran, will retire in mid-September. Sam’s Club CEO Kath McLay will take over her role. Chris Nicholas, the current chief operating officer of Walmart US, will become the new CEO of Sam’s Club.

Walmart has set itself apart from other retailers like Aimwho have struggled with weaker sales. It is better insulated from shoppers’ changing tastes and reactions to economic factors like high inflation because it sells more everyday staples like the nation’s largest grocery store.

Rainey said he continues to be surprised by consumers and their “willingness to spend.” But he added that they still want to save money.

Customers are buying more groceries from Walmart’s private labels, which typically cost less. In Walmart US’s grocery department, private label sales increased 9% year-over-year. Those brands account for 20% of Walmart’s total US sales.

Shoppers may also be looking to save by making more of their own meals instead of dining out. Walmart has noticed “a little change to cooking from home,” Rainey said. He saw an uptick in sales of ready meals and cooking tools like blenders and mixers.

While overall merchandise trends are improving, sales continue to drop single digits year-over-year, he said.

Walmart’s limited-time sales, called Rollbacks, have been especially popular. Walmart US CEO John Furner said on an earnings call that the company saw a rise in sales when it offered items like backpacks and discounted chips. It has had a higher number of food setbacks than a year ago, he added.

Walmart has seen inflation subside while other challenges persist.

In the prior-year period, Walmart and other retailers were trying to liquidate excess unsold merchandise. That led to both higher inventory levels and steeper discounts.

At the end of the second quarter, inventory was down 5% compared to a year earlier, Rainey said on the earnings call. Walmart has also had fewer sales, she said.

Food prices are holding steady, but general merchandise prices are down compared to last year, Rainey said. However, some basic grocery items have fallen.

Shoppers are buying more fresh meats, seafood and eggs as they become more affordable, Rainey said.

Back-to-school, one of the most important seasons for retailers, is off to a strong and early start, CEO Doug McMillon said. Those sales trends generally signal patterns for the coming months, so they bode well for Halloween, the holidays and general merchandise sales in the second half of the year, he said.

Still, Rainey said the company is planning conservatively and watching the amount of general merchandise it orders. He said consumers are facing new pressures, such as paying back student loan payments that have been halted for more than three years due to the covid pandemic.

“Although inflation has moderated and employment levels have remained stable, credit markets have tightened,” he said. “Energy prices are higher and some customers face additional expenses for the resumption of student loan payments in October. As such, we continue to be measured appropriately in our outlook.”

Correction: Walmart’s net income for the fiscal second quarter increased 53% over the prior year. An earlier version incorrectly expressed the percentage. The company’s previous guidance was for a range of adjusted earnings per share between $6.10 and $6.20. A previous version erroneously described the guide.