Walmart surges to all-time high as earnings beat on high-income shopper, e-commerce gains (2024)

Walmart on Thursday topped quarterly earnings and revenue expectations, as the discounter made significant e-commerce gains, drove profits with newer businesses like advertising and won over more high-income shoppers.

The big-box retailer said it now expects to hit the high end or slightly top its previous full-year guidance. Walmart had expected net sales growth of 3% to 4% and adjusted earnings per share of between $2.23 and $2.37.

Shares of the company hit an all-time high Thursday and closed about 7% higher.

In an interview with CNBC, Chief Financial Officer John David Rainey said one of the factors boosting Walmart's grocery business is the widening gap between the price of cooking at home and buying food at fast-food chains or restaurants.

Plus, he added, shoppers appreciate the convenience that Walmart offers. For the first time, its delivery business surpassed its store pickup in terms of volume, Rainey said.

"We've got customers that are coming to us more frequently than they have before and newer customers that we haven't traditionally had, and they're coming into a Walmart whether it's a virtual store online, or whether it's one of our physical stores," Rainey said.

Here's what the discounter reported for the fiscal first quarter compared with what Wall Street expected, according to a survey of analysts by LSEG:

• Earnings per share: 60 cents adjusted vs. 52 cents expected
• Revenue: $161.51 billion vs. $159.50 billion

Walmart's net income jumped to $5.10 billion, or 63 cents per share, in the three-month period that ended April 30, compared with $1.67 billion, or 21 cents per share, in the year-ago period.

Revenue climbed 6% from $152.30 billion in the year-ago quarter. That increase includes a benefit of roughly 1% from an additional selling day in the period.

As the nation's largest retailer and private employer, Walmart is often viewed as a bellwether for the U.S. economy. Yet it has generally fared better during an inflationary period than other retailers because it sells staples like groceries and has a value-oriented reputation.

Same-store sales for Walmart U.S. climbed by 3.8%, excluding fuel. The industry metric includes sales from stores and clubs open for at least a year. At Sam's Club, same-store sales rose 4.4% year over year, excluding fuel.

E-commerce sales shot up by 22% year over year for Walmart U.S., fueled by store pickup and delivery of online orders, as well as the company's growing third-party marketplace.

Walmart's customers in the U.S. made more visits to its stores and website in the quarter, but spent roughly the same as in the year-ago period. Transactions rose 3.8% and average ticket was flat compared with the year-ago quarter.

This week brought promising news for Walmart and other retailers: Inflation eased in April, according to the Labor Department data released Wednesday. The consumer price index was up 3.4% year over year. The closely watched number tracks how much goods and services cost at the cash register.

Walmart saw some signs of easing, too. On the company's earnings call, CEO Doug McMillon said inflation in the U.S. was only up 0.4% for the quarter, with mid-single digit deflation on general merchandise and low-single digit inflation in food.

He said the company has increased "rollbacks," price reductions on specific items that it typically advertises on its website or with signs in its stores.

Even so, the discounter has noticed the impact of inflation, as its shoppers have been selective with purchases. Rainey said customers' "wallets are still stretched." He said shoppers have bought less general merchandise, such as home goods and electronics, as they prioritize spending on food and health-related items, a trend that the company has seen for the past several quarters.

Still, "even the low-income consumer seems to be holding in there pretty well," Rainey said. He added that sales even in general merchandise categories improved year over year.

Walmart had a weaker sales month in April, which mirrored retail sales numbers released by the Commerce Department on Wednesday, but that was offset by sales trends in the other months of the quarter. Rainey chalked up a weaker April to Easter shifting into March, along with cooler and rainier weather.

He said sales have picked up again in May and looked similar to the average of the fiscal first quarter.

On the earnings call, McMillon emphasized Walmart's expansion of its online business and success getting more customers to buy other items besides groceries. Groceries drive most of Walmart's business — accounting for nearly 60% of the company's U.S. sales in the most recent full fiscal year — but aren't as profitable as selling items like clothing or makeup.

"We punched below our weight on general merchandise, specifically in apparel and home, for a really long time, maybe forever, and I think the progress we're seeing right now is driven by the in-store remodels and e-commerce," McMillon said.

As Walmart tries to appeal to younger and more affluent households, it recently launched a new private-label grocery brand, which includes bolder flavors, plant-based items and more. It is also upgrading and modernizing more than 1,400 stores across the country. The renovated stores showcase some of the retailer's newer and more fashion-forward brands like Love & Sports, an activewear brand developed with fashion designerMichelle Smith and SoulCycle instructor Stacey Griffith, and a kitchen and home decor line called Beautiful, which was developed with Drew Barrymore.

Walmart has looked beyond retail to drive profits higher and fend off rivals like Amazon.

Those newer businesses like advertising and its subscription-based membership program, Walmart+, lifted its profit during the quarter and contributed to its operating income growth outpacing its sales growth. The company's global advertising business grew 24% during the quarter, including 26% growth for the segment in the U.S.

The company's third-party marketplace has also been a significant driver of the business. Like Amazon, Walmart has expanded its online business by welcoming sellers onto its website, and then made more money by offering advertisem*nt and fulfillment services to those sellers.

In the U.S., marketplace sellers increased 36% in the quarter and the marketplace now carries more than 420 different items, McMillon said on an earnings call. In Mexico, the number of marketplace sellers grew by more than 50% with the total item count up nearly 80%.

Rainey told CNBC that a third of Walmart's year-over-year operating income gains came from those newer businesses.

Walmart has been slashing spending in some areas and investing heavily in others. Earlier this week, the company said it would lay off and relocate hundreds of its corporate employees, including the transfer of many to its headquarters in Bentonville, Arkansas. That move came on the heels of the retailer shuttering its Walmart health clinics, a network of doctor and dentist offices that had opened next to its stores.

On the other hand, the big-box retailer has poured money into other efforts. As it chases advertising dollars, Walmart announced in February that it will acquire smart TV maker Vizio in a $2.3 billion deal.

Rainey said Walmart's announcement this week, which will relocate hundreds of people who currently work from their homes or in offices in Dallas, Toronto and Atlanta, is about shifting away from remote work, not about cost cuts. The move also included layoffs. Walmart has not announced a five-day-a-week office policy, but has said it wants employees to work from the office the majority of the time.

"We just feel strongly in the benefit of working together," he said. "One of our competitive advantages is our culture — and that's fostered by being together."

Shares of Walmart closed Thursday at $64, bringing the company's market cap to $515.83 billion. As of Thursday's close, the company's stock is up about 22% so far this year, surpassing the roughly 11% gains of the S&P 500 during the same period.