Walmart Inc. increased its outlook for sales in the full year, a sign the world’s biggest retailer is winning over price-sensitive shoppers while digesting costs it expects to rise in the coming months.
The company now sees net sales rising 4.8% to 5.1%, higher than its previous projection in August. This marks a second increase in forecast during the fiscal year.
The results are likely to alleviate some concerns that consumers are pulling back amid a cooling job market, corporate layoffs and rising prices. Rival big-box chains have warned that consumers remain cautious, increasing attention on the world’s largest retailer as it prepares to enter its next chapter under a new chief executive next year.
“We’re keeping a keen eye on what’s going on with the consumer, but feeling good about our business overall,” Chief Financial Officer John David Rainey said in an interview, adding that the company is seeing higher costs. “There’s still some pressure and perhaps more pressure that we can see over the coming months.”
E-commerce was among the bright spots. Walmart continues to broaden delivery areas, lower shipping costs and expand its third-party marketplace, he said.
The company separately announced it is transferring the listing of its stock to the Nasdaq stock market to begin trading there Dec. 9., a move to reflect its focus on tech.
The shares were little changed at 7:59 a.m. in New York trading. The stock has advanced 11% so far this year through Wednesday’s close, slightly less than the advance of the S&P 500 Index over the same period.
Chanel purses
The company, based in Bentonville, Ark., has gained market share across income groups with low prices, a wide assortment of products and burgeoning digital services. Its grocery business, which accounts for about 60% of U.S. sales, is helping fuel demand as consumers prioritize necessities. But in recent years, Walmart has drawn in more affluent shoppers with online services and fast deliveries. Its digital offerings now include luxury items like pre-owned Chanel bags and other accessories.
Consumer spending has been largely consistent, Rainey said, though there’s “some slight moderation” within lower-income households. Middle- and higher-income shoppers aren’t pulling back, with the latter spending more in some areas. Disruptions in food stamps resulted in a temporary softness in sales during the quarter, though that has since rebounded, he said.
Prices rose 1% during the latest quarter in the U.S. at Walmart, suggesting that the retailer has been able to minimize inflation from tariffs. The company is absorbing some costs and passing on others, while working closely with suppliers to keep prices as low as possible and sourcing goods from other regions when necessary.
The company is also incorporating artificial intelligence across its operations, and has teamed up with OpenAI to enable shoppers to purchase its products on ChatGPT.
Walmart is among the latest retailers to post quarterly results. Target Corp. and Home Depot Inc. reduced their full-year outlooks after weaker-than-expected quarterly sales. Other consumer-facing companies, such as restaurant operators, have warned that younger consumers are spending less.
CEO transition
The current quarter will be the company’s last under the direction of CEO Doug McMillon, who plans to retire next year. John Furner, who has led the company’s U.S. business since 2019, will replace him. McMillon will remain on the board until June and be an advisor through the end of next fiscal year.
McMillon, who started working at the retailer in his teens, has been credited for transforming the company into a digital powerhouse consisting of e-commerce, advertising and marketplace businesses. Walmart’s stock has quadrupled during his tenure.
Like McMillon, Furner has spent decades at the retailer. His father worked for Walmart, and Furner started as a part-time employee in the garden center at a store in Arkansas. Furner, who had long been viewed as a successor to McMillon, will look to usher Walmart into the AI age and continue growth amid fierce competition. Walmart said it will name Furner’s replacement before the end of the fiscal year.
Kang writes for Bloomberg.
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