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Walmart shares fall as retailer gives cautious outlook on consumer spending

Atchison, Kansas. Walmart store logo with gardening products for sale.

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Walmart Thursday beat Wall Street’s third-quarter profit estimates as sales rose, but the big-box retailer struck a cautious tone with its outlook after seeing consumer spending weaken late in the period.

The company’s shares fell more than about 8% on Thursday after hitting an all-time high the day before. Walmart gave slightly lower-than-expected guidance for the year as it enters the critical holiday shopping period.

The company expects adjusted earnings per share of between $6.40 and $6.48 for the year, lower than the $6.48 analysts expected but higher than its previous range. Walmart expects consolidated net sales to increase 5% to 5.5%, also up from the previous range.

Inflation has also fallen — and for some categories, deflation has set in — a trend that could help Walmart shoppers but hurt the company’s sales. Prices for some grocery items remain higher, but they have fallen for dairy, eggs, chicken and seafood, CEO Doug McMillon said during the company’s earnings conference call . He added that relief would come for customers as they search for Christmas gifts.

Prices for general merchandise continued to fall, setting the company up for a turnaround. Its sales increased in part because buyers had to pay higher prices for many items during times of inflation.

“In the United States, we could face a period of deflation in the coming months and although this would put more unitary pressure on us, we welcome it, because it is better for our customers,” he said. he declares.

In a separate interview with CNBC, Chief Financial Officer John David Rainey said consumers are “leaning heavily” on major promotions as they monitor their spending and search for deals. As customers expect lower prices, the company has seen a drop in purchases before and after a sales event.

“Our events have been strong,” he said. “We’ve been happy with it. Halloween has gone well overall. But over the last couple of weeks of October, there have definitely been some trends in the industry that have made us pause and rethink in some ways. protects the health of the consumer.”

At the start of the holiday quarter, however, he said sales of items, including clothing, picked up as holiday promotions gained momentum.

Here’s what Walmart reported for the three months ended Oct. 31, compared to what analysts expected, according to consensus estimates from LSEG, formerly known as Refinitiv:

  • Earnings per share: $1.53 adjusted versus $1.52 expected
  • Revenue: $160.80 billion versus $159.72 billion expected

In the fiscal third quarter, Walmart’s net income rose to $453 million, or 17 cents per share, compared with a loss of $1.8 billion, or 66 cents per share, for the same period a year earlier. Walmart recorded a loss during this quarter due to the settlement of opioid-related lawsuits.

Revenue increased from $152.81 billion a year ago. It grew on the strength of the retailer’s grocery business, which thrived during a period of high inflation, and digital sales.

Comparable sales, an industry measure also known as same-store sales, increased 4.9% for Walmart US and at Sam’s Club they increased 3.8% year over year .

In the United States, shoppers visited and spent more. Customer transactions increased by 3.4% and the average ticket increased by 1.5% compared to the previous year. E-commerce sales grew 24% in the U.S. and 15% globally year over year.

Walmart also makes money in newer ways, such as selling ads and annual subscriptions to Walmart+, its answer to Amazon Prime.

Revenue from its advertising business, Walmart Connect, jumped 26% from the year-ago period.

As the holidays approach, investors are betting that the big-box retailer has the ingredients to boost sales, even as shoppers become more discerning. It’s the largest grocer in the country, which helps generate more regular foot traffic.

The company’s shares hit an all-time high Wednesday, dating back to when Walmart debuted on the New York Stock Exchange in August 1972. The stock closed at nearly $170 Wednesday, up about 19% over the year. On Thursday, however, shares closed the day at $156.04.

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