By Ananya Mariam Rajesh and Aishwarya Venugopal
(Reuters) -Walmart on Tuesday raised its annual sales and profit forecast for the third time in a row as people bought more groceries and merchandise, a sign that the world’s largest retailer continues to gain market share ahead of the holidays.
Shares of Walmart (NYSE:), which are up nearly 60% this year, rose as much as 4.5% in early trading to a record high of $87.88.
The retailer is one of the first major U.S. chains to provide insight into the key holiday quarter and how consumers plan to spend as inflation subsides.
“In the U.S., in-store volumes grew, in-store pickup grew faster and in-store delivery grew even faster,” said Walmart CEO Doug McMillon.
Although inflation has not made much progress in recent months, it is on a downward trend, increasing purchasing power. Walmart said it saw market share increases across income cohorts, led primarily by upper-income households earning more than $100,000 in annual income.
The retail whistleblower now forecasts consolidated net sales to rise 4.8% to 5.1% in fiscal 2025, compared to previous expectations of 3.75% to 4.75% growth.
It also expects annual adjusted earnings per share to be between $2.42 and $2.47, compared to its previous forecast of $2.35 and $2.43.
“Walmart continues to gain market share as they benefit from an environment that fits their value proposition, but also benefit from a host of internal improvement drivers that are emerging,” said DA Davidson analyst Michael Baker.
Retailers including Walmart, Amazon.com (NASDAQ:) and Goal (NYSE:) started the holiday shopping season earlier than usual, offering deals on everything from toys to home goods.
Walmart and Target stocked more private label brands and expanded their grocery offerings as consumers look to buy essentials and gifts at the lowest possible price.
“The majority of our customers maintain their vacation plans year after year, amid the election, calendar shift and economic backdrop,” Walmart said.
Republican Donald Trump’s victory in the 2024 U.S. presidential election could weigh on some shoppers, said Minkyung Kim, an assistant professor of marketing at Carnegie Mellon University’s Tepper School of Business.
Trump’s tariffs, if implemented in 2025, could raise prices on clothing, toys, furniture, appliances, shoes and travel items, especially on items of which China is a major supplier, the report said. National Retail (NYSE:) Federation, an American trade group chaired by the American head of Walmart.
“We are concerned that significantly higher rates could result in higher costs for our customers at a time when they are still feeling the remnants of inflation,” a Walmart spokesperson said.
“We never want to increase prices… We will work with government officials and our suppliers to minimize the impact on our customers.”
ONLINE BUMPER
The company has invested billions in expanding its e-commerce business by offering more product choices online and has built automation across its supply chain to stock fresher products and improve delivery times as consumers increasingly prefer convenience of buying groceries online.
In the third quarter, US e-commerce sales rose 22%, led by in-store pickup and delivery, as well as market and advertising growth.
Walmart’s global e-commerce business had surpassed $100 billion in sales by 2023, and CFO John David Rainey said in June that he expects his U.S. e-commerce business to post an initial profit within a year or two.
To broaden the appeal of its delivery service, Walmart cut the annual membership fee for its Walmart Plus membership by 50% ahead of the holidays. The retailer is offering US shoppers a one-year membership for $49 through December 2.
Walmart Plus members receive unlimited free same-day deliveries from stores on orders over $35.
“E-commerce growth is an indicator of where the customer is going, and Walmart Plus is a great way for customers to amortize delivery costs over time,” CFO Rainey said on a post-earnings call.
MORE BUYING POWER
In the third quarter ended Oct. 31, Walmart’s U.S. comparable sales rose 5.3%, better than analysts’ expectations of a 3.61% increase, according to data compiled by LSEG. Sales grew across all categories, including the general goods segment, which had suffered declines for more than two years due to persistent inflation. The segment saw a boost from sales of toys and household items.
Walmart also posted comparable sales growth in its health and wellness category, helped by strong demand for GLP-1, or weight-loss drugs.
“US customers remain resilient and their behavior has remained largely consistent over the past four to six quarters,” the CFO said.
Walmart’s focus on home and grocery products had protected the company from a slowdown in spending on non-essential products, helping the company post better-than-expected quarterly results in the first half of the year.
As purchasing power increases, analysts expect that upper- and middle-income consumers will especially reduce the shift in spending on non-essential or nice-to-have merchandise.
“I really think Walmart has captured a more affluent consumer. I think the Walmart Plus membership has helped do that and the company continues to reflect good strength in their online business and their pickup and delivery services,” said Telsey Advisory Group analyst Joseph Feldman. .
The retailer reported adjusted quarterly profit of 58 cents per share. Analysts had expected 53 cents per share.
