Walmart reported earnings and revenue that beat expectations as shoppers slammed by sticky inflation flocked to the discount chain to start their holiday shopping.
In the three months ended Oct. 31, Walmart reported adjusted earnings per share of 58 cents, above expectations of 53 cents. The company posted revenue of $169.6 billion, above expectations of $167.7 billion and up from $160.8 billion in the year-ago period.
The company said it now expects net sales will grow between 4.8% and 5.1% this year on increased demand for discount goods, up from a previous forecast between 3.75% and 4.75%.
Walmart shares rose 4.9% Tuesday morning.
Sales outside the grocery aisles rose year-over-year for the second quarter in a row after 11 straight quarters of declines as customers continue to seek out good deals, CFO John David Rainey told CNBC.
“We’re expecting this holiday period to be very consistent with that,” he said. “They’re focused on price and value.”
The buoyant earnings report comes as reports show signs of easing inflation and gas prices have started to come down – but Americans remain frustrated by high prices.
Walmart has emerged as somewhat of a standalone in the retail industry as it has grown its share of the market, “primarily from upper-income households.” Households making more than $100,000 annually accounted for 75% of Walmart’s gains, according to CNN.
The trend is a sign that households at all income levels are searching for discounts and deals as they struggle with sticker shock on everyday goods — and Walmart is reaping the benefits. Walmart shares are up 66.1% so far this year.
President-elect Donald Trump’s vow to impose tariffs on imports from China and other countries has fueled fears that his policies may reheat inflation. During his presidential campaign, Trump said he would enact a 10% to 20% on all imports, including a 60% to 100% tariff on goods from China.
Rainey warned the tariffs could force the discount chain to raise its prices, even as it relies on its “everyday low prices” to win over customers.
“We never want to raise prices,” Rainey said. “But there probably will be cases where prices will go up for consumers.”
About two-thirds of the products that Walmart sells are made in the US, he said.
“We’ve been living under a tariff environment for seven years, so we’re pretty familiar with that,” Rainey told CNBC. “Tariffs, though, are inflationary for customers, so we want to work with suppliers and with our own private-brand assortment to try to bring down prices.”
Trump’s transition team did not immediately respond to requests for comment.
In the meantime, a boost in discretionary spending and home deliveries helped Walmart’s earnings for the third quarter.
Same-store Walmart sales rose 5.3% and same-store Sam’s Club sales jumped 7%.
Visits to Walmart stores and its website – and the amount spent per visit – increased in the third quarter. US transactions rose 3.1% and average ticket grew 2.1% since last year.
E-commerce sales rose 22% in the US as more customers used Walmart’s home delivery and curbside pickup options.
Rainey said Walmart’s e-commerce division is “getting very close to profitability” as more customers pay extra fees for quicker deliveries within a one-hour or three-hour time frame.
Holiday spending is expected to tick up this year, though not as much as usual. Holiday spending in November and December will likely increase 2.5% to 3.5% to between $979.5 billion and $989 billion, according to the National Retail Federation. This growth falls below last year’s 3.9% jump, which totaled spending of $955.6 billion.
But Rainey said the holiday season is “off to a pretty good start” at Walmart.
Big ticket items like televisions, Apple AirPods, Beats headphones and even car tires have been flying off the shelves. Meanwhile, warmer clothing and space heater sales have disappointed as some parts of the country experience unseasonably warm weather.
