Walmart has sent a reassuring signal over the financial health of the American consumer ahead of the holiday shopping season, lifting annual profit forecasts on the back of higher quarterly sales.
The world’s biggest retailer brushed aside rising world trade tensions and turmoil elsewhere in the sector to report accelerating sales growth, sending shares up over 3 per cent in pre-market trading.
Walmart’s US business led the way in the quarter, helping offset weakness in some overseas markets, including the UK. Domestic like-for-like sales rose 3.2 per cent from a year ago.
The company has benefited from competitors that are closing stores or have gone out of business, enjoyed strong demand for its grocery offering, and made strides online. Ecommerce sales in the US leapt 41 per cent in the quarter.
Sales internationally were weaker, rising 1.3 per cent on a net basis.
Doug McMillon, chief executive, warned of “challenging” conditions in several countries, particularly the UK, where the company runs Asda.
Concerns over Brexit, he said, “continue to negatively affect customer spending patterns”.
The earnings report from Walmart, whose US chief Greg Foran unexpectedly said last month he was leaving the company, also showed how its battle with Amazon for retail supremacy is weighing on its bottom line.
Operating income in the three months to the end of October dipped 5.4 per cent from a year ago to $4.72bn, even as revenues across the group rose 2.5 per cent to $127bn. Investments from Walmart include the roll out of same-day delivery and buy-online-collect-in store.
The figures from Walmart, long considered a bellwether for low- and middle-income US households, are being scrutinised particularly closely as Wall Street frets about recession risks. Strong domestic consumer spending has so far tempered those fears, although industry-wide retail sales fell in September for the first time in seven months. Figures for October are due for release on Friday.
On the back of its better than expected earnings on Thursday, Walmart said it now expected annual earnings per share, adjusted for exceptional items, to increase slightly from last year. It had previously cautioned that they could decline slightly.
Walmart’s well-received results come two weeks before Black Friday in the US, the busiest shopping day of the year. The company plans to begin offering discounts online from the Wednesday, and in stores on the evening of Thanksgiving. Offers will include $80 off iPads and $50 off Oculus virtual reality headsets.
The figures are among the first of what are expected to be a mixed batch of earnings from the US retail sector. Companies that have struggled to adapt to the age of ecommerce are expected to post weaker sales in coming days. Analysts are forecasting a like-for-like sales declines at department store chains Macy’s and JCPenney, according to data from S&P Capital IQ.
Shares in Walmart have already risen 30 per cent so far this year, giving the company a market capitalisation of $344bn.