Walmart (WMT) is winning over US shoppers as inflation continues to take a toll.
In the retail giant’s second quarter fiscal year 2024 earnings release, out before the market open on Thursday, Walmart posted same-store sales rose 6.30%. Meanwhile, its competitor Target (TGT), which reported Q2 results Wednesday, saw a 5.4% drop in sales and shared a dreary outlook for the rest of the year.
This comes as consumers’ wallets remain pinched from ongoing headwinds like higher gas prices, a slowdown in the US job market, the looming return of student loan payments this fall, higher mortgage rates, higher interest rates, and higher costs for groceries.
Foot traffic increased for Walmart, up 2.8%, along with a higher ticket, up 3.4%. The company’s focus on e-commerce seems to be working, with online sales up 2.3% in the quarter.
Sales at Walmart’s wholesale business, Sam’s Club US, also got a boost last quarter, rising 5.5%, but that was slightly lower than estimates of up 5.58%.
The earnings rundown:
Here’s what Walmart reported compared with Wall Street estimates, according to Bloomberg data.
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Net revenue: $161.6 billion versus $159.7 billion expected
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Adjusted diluted EPS: $1.84 versus $1.70 expected
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US same-store sales growth: 6.3% versus 4.04% expected
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Traffic growth: 2.90% versus 1.63% expected
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Ticket growth: 3.40% versus 2.00% expected
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E-commerce growth: 2.30% versus 1.54% expected
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Gross margin: 23.38% versus 23.55% expected
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Inventory growth: -5.34% versus 5.54% expected
What else we’re watching: C-suite changeup
On Wednesday, Walmart announced Sam’s Club CEO and president Kathryn McLay is moving into a new role as head of the international division, replacing Judith McKenna who is retiring, effective September 11, 2023.
As part of this change, Walmart US CEO John Furner outlined further executive changes in a letter to all Walmart employees obtained by Yahoo Finance.
Chris Nicholas, who previously served as COO and as CFO before that, was promoted to Sam’s Club US CEO and President. Kieran Shanahan, an exec in the International Operations divisions, was named executive vice president and COO for Walmart US.
What analysts said pre-earnings:
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“We continue to believe Walmart is well positioned in an uncertain macro environment, with its price and value proposition and with increased convenience and assortment, despite persistent indicators of pressure on the consumer, including stubborn food inflation.” -Robert Drbul, Guggenheim
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“Rollbacks continue to drive price leadership. Our checks point to an aggressive slate of Rollbacks for key Back-to-School items, which reinforces our near-term confidence on comp trends … Rollbacks are reinforcing price leadership in grocery and we expect to see a greater focus on general merchandise in the second half of the year. We do believe that comp upside may be more limited as inflation wanes, with data pointing to a comp consistent with our 3.9% US comp [same-store sales] view. However, we continue to expect a combination of expense discipline and more favorable merchandise mix to drive continued earnings strength.” -Edward Yruma, Piper Sandler
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“[Walmart] is fundamentally turning the traffic corner, yet the stock refuses to break out and trails the market 300bps [year to date]. We think a clean beat and raise could get the Street to $6.50 in ’23 and $7+ in ‘24.” -Greg Melich, Evercore ISI
This story is breaking and being updated.
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Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].
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