Spending

Walmart beats second-quarter expectations as Americans continue to spend

NEW YORK (AP) — Walmart reported better-than-expected second-quarter results as more Americans sought to cut grocery costs at the nation’s largest retailer in the face of soaring inflation.

However, this price increase meant that customers were cutting back on unnecessary purchases.

Walmart Inc. earned $5.15 billion, or $1.88 per share, or $1.77 excluding costs and one-time charges. That easily beat the $1.62 per share Wall Street was looking for, according to FactSet.

It also topped last year’s profit by $4.27 billion.

Sales rose 8.4% to $152.86 billion, beating industry analysts’ forecasts.

Sales at stores open for at least a year rose 6.5% as more shoppers turned to Walmart for their groceries. This followed a 3% increase in the first quarter.

Online sales increased 12%, following a 1% increase in the previous quarter.

“We’re thrilled to see more customers choosing Walmart during this time of inflation, and we’re working hard to support them as they prioritize their spending,” CEO Doug McMillon said.

McMillon, however, noted that strong sales have been recorded at grocery stores, which have lower margins, at a time when the company is cutting prices to get rid of excess inventory after a huge change in the way Americans are spending money this year.

Like many big-box retailers, Walmart benefited from the early days of the pandemic as shoppers splurged on food and other necessities, especially online.

But shoppers are spending less on items that have performed well during the pandemic, such as casual clothes and televisions, when they have focused on household activities. Soaring inflation, which slowed last month but is still near its highest level in four decades, also presents challenges for Walmart and other retailers as low-income shoppers cut their expenses.

Late last month, Walmart spooked investors by lowering its second-quarter and full-year earnings outlook, saying rising food and gas prices were forcing shoppers to cut discretionary items, especially clothing, which generates higher profit margins. The last time Walmart lowered its mid-quarter earnings outlook was in October 2015.

But on Monday, it forecast a smaller profit decline for the year. It now expects consolidated adjusted operating profit to decline 9% to 11%, an improvement from the company’s earlier forecast of 11% to 13%.

Bentonville, Arkansas-based Walmart Inc. is among the first major retailers to report quarterly results and is considered a crucial barometer of spending given its size and breadth of customer base.

Shares rose nearly 4% before the opening bell on Tuesday.

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