Walmart, the largest retailer in the United States, on Thursday reported stronger-than-expected growth in sales and profit, and raised its full-year forecast for the second consecutive quarter, as it continued to attract shoppers spending more per visit to its stores.
Comparable sales rose more than 6 percent in the second quarter, versus the prior year, comfortably beating Wall Street’s expectations. Grocery sales were particularly strong, the company said, while spending on general merchandise fell slightly.
“We had another strong quarter,” Doug McMillon, Walmart’s chief executive, said in a statement. “Food is a strength, but we’re also encouraged by our results in general merchandise versus our expectations when we started the quarter.”
Walmart’s results capped a week of major retailers opening their books, including Home Depot, Target and TJX, which owns T.J. Maxx and Marshalls. Home Depot and Target reported declines in their latest quarterly sales, while TJX’s off-price retailers reported a bigger-than-expected rise in sales and the company revised its forecast for the full year higher, like Walmart.
The earnings offer a glimpse into consumers’ purchasing habits as they continue to navigate stubborn inflation and shift their spending from goods like furniture and electronics to services like travel, dining out and going to the movies. Rising prices have brought new shoppers to Walmart — in the form of higher earners buying cheaper groceries and other essentials at the big-box stores — while also squeezing purchases of discretionary products like apparel and home goods.
Executives at a variety of retailers have acknowledged this trend.
“A more cautious and value-driven consumer” has affected sales, Rosalind Brewer, the chief executive of Walgreens Boots Alliance, told analysts recently. Customers were “feeling the strain” of high inflation and interest rates, she said, as well as general economic uncertainty and the end of many pandemic stimulus measures. “They are pulling back on discretionary and seasonal spend and responding strongly to promotional activity,” she said.
That said, consumer spending has largely held up, propelled by a resilient labor market and rising wages. Retail sales in July rose 3.2 percent from a year earlier, according to data released on Tuesday, surpassing economists’ expectations. In July, many retailers ran promotions around Amazon Prime Day, which has become a significant sales event during the summer.
“Fears of a recession, or at least a severe recession, have largely subsided, and the consumer is generally healthy,” Ted Decker, Home Depot’s chief executive officer, said Tuesday on an earnings call.
But retail industry watchers have noted that the restart of student loan repayments in October could weigh on consumer spending, and executives are largely anticipating lower spending for the rest of the year.
“The upcoming resumption of student loan repayments will put additional pressure on the already-strained budgets of tens of millions of households,” Michael Fiddelke, Target’s chief financial officer, told analysts on Wednesday. “Against this backdrop, we remain cautious in our planning.”
Walmart reported a rise in revenue of nearly 6 percent in the second quarter. It expects sales for the full year to grow between 4 and 4.5 percent.
Once back-to-school spending ends, retailers and analysts will look ahead to the crucial holiday shopping season to gauge the health of American consumers. Shoppers will start to see those seasonal products, like lanterns, ornaments and artificial Christmas trees, roll out in a few weeks.