Walmart reported impressive sales during the holiday season as cost-conscious consumers sought better deals on groceries and other items.
Despite a general decrease in overall spending during the November-December shopping period, sales rebounded last month, indicating that shoppers were still spending despite rising prices and interest rate hikes by the Federal Reserve.
The retail giant reported full-year sales of $611.3 billion, an increase of 6.7% from the previous year. Nevertheless, the company expects sales to rise between 2.5% and 3% and U.S. sales to increase between 2% and 2.5% for the next fiscal year.
Walmart’s earnings per share are forecasted to range from $5.90 to $6.05, excluding fuel, which is lower than the average forecast of $6.52 per share by analysts surveyed by FactSet.
Walmart executives attributed the cautious guidance to the unknowns in the economy, such as rising interest rates and declining consumer savings.
The company’s earnings projections also reflect additional interest payments and plans to buy out Massmart and alert innovation.
During the pandemic, Walmart saw increased sales as consumers spent more on discretionary items.
However, consumers have shifted their focus to necessities like groceries, leaving the company with excess inventory and lower profits from high-margin merchandise.
Walmart has observed a trend of shoppers trading down to private brands to save costs, which accelerated during the fourth quarter.
The company offers fresh food and clothing assortments to retain these shoppers. Food sales led to Walmart’s largest sales month in history in December. The retailer ended the quarter with flat inventory compared to last year, better than expected.
In the quarter ending January 27, the company reported revenue of $164 billion, up 7.3% from last year, with profits of $6.28 billion.
As a result of one-time costs and benefits, earnings per share were $1.71, beating Wall Street expectations of $1.52. The holiday season sales rose a weaker-than-expected 5.3% in November and December.
Walmart and other major retailers offered discounts in October to help consumers spread their spending, and weeks-long discount events replaced Black Friday doorbusters.
Walmart’s comparable sales, including established stores and online sales, rose 8.3%, with online sales rising 17%. Sam’s Club, a subsidiary of Walmart, reported sales growth of 12.2% and an increase in membership among mid to high-income households, millennials, and Gen Z.
Despite the cautious guidance for the next fiscal year, Walmart’s strong performance in the fourth quarter was a positive sign for the company.
The retailer’s strategy of offering better deals and fresh food and clothing assortments to attract cost-conscious consumers works.
Additionally, the company’s online sales growth of 17% indicates a continued shift towards e-commerce, which Walmart has been investing in to stay competitive. The company’s flat inventory compared to last year also suggests that it has improved its supply chain management.
Overall, Walmart’s results indicate that it is well-positioned to navigate the uncertain economic climate and continue to grow its business.
While challenges are still ahead, such as rising interest rates and declining consumer savings, the retailer’s strong performance in the fourth quarter and its strategy for attracting cost-conscious consumers give optimism.
Despite a general decrease in overall spending, Walmart’s strong sales during the holiday season and impressive online sales growth demonstrate its resilience in economic uncertainty.
The company’s cautious guidance for the next fiscal year reflects the challenges ahead, but its strategy for attracting cost-conscious consumers and continued investment in e-commerce position it well for future growth.
