Walmart delivers another strong quarter but economic uncertainty clouds outlook for retail sector

Zhihan Ma, senior analyst on U.S. broadline and hardlines retail at Bernstein, joins BNN Bloomberg to discuss Walmart's Q1 earnings numbers.

NEW YORK — Walmart delivered another quarter of impressive sales as speedy deliveries and low prices served as a magnet for shoppers across the income spectrum.

Yet like other major retailers posting financial results this week, it was cautious about the rest of the year given the current economic uncertainty. On Thursday, it issued a forecast for the current quarter that was weaker than what Wall Street had been expecting.

Shares slipped more than two per cent before the opening bell Thursday.

Walmart has resonated with many Americans who are increasingly careful about where they spend their money as inflation has taken a bigger bite out of paychecks, particularly since the start of the Iran war in late February. Traffic at Walmart can be a barometer of consumer spending given its vast customer base. More than 150 million customers are on its website or in its stores every week, according to Walmart.

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On Thursday, Walmart touted strong sales that were fueled by online shopping.

Comparable sales at U.S. Walmart stores rose 4.1 per cent during the three-month period ended April 30. Walmart’s U.S online sales rose 26 per cent, the company said.

Walmart’s promise of lower prices, improved merchandise and faster delivery has also attracted wealthier shoppers. The biggest gains in market share for Walmart are coming from households with annual income over US$100,000. That shift is taking place as lower-income shoppers become more entrenched in what economists collectively call a K-shaped economy.

“Our results reflect our continued focus on delivering across the enterprise -- better shopping experiences, a broader assortment, and faster delivery,” CEO John Furner said in a prepared statement Thursday.

Yet U.S. retailers have spent months navigating an uncertain economic environment, from U.S. President Donald Trump’s tariffs to the impact of soaring gasoline prices due to the war. The average price for a gallon of regular gasoline raced higher this week and did so again overnight. Gasoline prices are about 45 per cent above where they were at this time last year.

Based on quarterly financial reports this week from Walmart, as well as Target, Home Depot, Lowe’s and TJX, shoppers are cautious but still spending, helped by more generous tax refunds. Yet there is a widespread belief among economists that once of those refunds dry up, shoppers will pull back on spending. Consumer spending is the dominant economic engine for the U.S.

Target reported the largest jump in comparable sales in four years Wednesday, but a cautious outlook overshadowed convincing evidence that changes under the company’s new CEO are resonating with customers. Target raised its annual revenue outlook Wednesday, but even that falls below the pace of its first quarter this year.

The nation’s two largest home improvement retailers Home Depot and Lowe’s this week reported strong sales, but both companies said that customers are putting off larger home projects.

“I think, overall, this has been the most difficult housing market that I’ve faced in this business since the financial crisis,” Lowe’s CEO Marvin Ellison said this week.

Walmart, based in Bentonville, Arkansas reported first-quarter earnings of US$5.33 billion, or 67 cents, for the quarter ended April 30. Adjusted per-share results were 66 cents, matching the 66 cents that analysts expected, according to FactSet.

For the year-ago quarter, the company reported net income of US$4.48 billion, or 56 cents per share.

Sales rose 7.3 per cent to US$177.75 billion in the fiscal first quarter, above the $174.84 billion that analysts predicted.

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For the second quarter, Walmart expects sales will be four per cent to five per cent higher than the same period a year ago. That brings the range to between US$182.8 billion and US$184.59 billion. It also expects per-share profit to be between 72 cents and 74 cents. Analysts had been projecting per-share earns of 75 cents on sales of US$186.2 billion, according to FactSet.

For the year, Walmart stuck to the guidance it issued in February of per-share earnings between US$2.75 and US$2.85, and an increase in sales of between 3.5 per cent and 4.5 per cent, or between US$731.1 billion and US$738.2 billion.

Wall Street has been anticipating profits of US$2.92 per share on sales of US$749.01 billion for the year.

Anne D’innocenzio, The Associated Press

Read more:

• TJX raises annual sales, profit forecasts
• Target doubles annual sales growth forecast as turnaround starts to pay off
• Home Depot reiterates annual forecasts, flags housing affordability woes
• Lowe’s maintains annual forecasts amid challenging U.S. housing market