Walmart beats Wall Street forecasts in Q2, stock surges 8% to hit record high over annual revenue guidance boost

Walmart Inc. raised its annual sales guidance and profit forecasts on Thursday, August 15, for a second time this year, buoyed by consumers flocking to its stores for inexpensive essentials, sending its shares up eight per cent to hit a fresh record high during trading hours.

The Bentonville, Arkansas-based company beat Wall Street estimates in the second quarter of 2024 and now expects net sales to rise as much as 4.75 per cent for the year, versus previous guidance for a gain of as much as four per cent. It also raised its operating income targets.

Walmart shares rose 8.4 per cent in New York trading, the biggest intraday gain since November 2022. The blue-chip stock was up 31 per cent year-to-date (YTD) through Wednesday’s close, outperforming the S&P 500's 14.4 per cent rise.

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Walmart Q2 Results, 2024 outlook

The world's largest retailer by sales is one of the first big US chains to report quarterly results that provide insight into consumer health, particularly after the government reported an unexpected deterioration in the labour market, raising fears of a recession.

Despite several years of above-average inflation, Walmart's results suggest that consumer spending remains resilient. Inflation has also shown signs of moderating. "We have not seen any additional strain on consumer health in our business," said John David Rainey, Chief Financial Officer (CFO) at Walmart.

Walmart's US comparable sales, which combine online and sales at stores open for at least a year, rose 4.2 per cent, beating the 3.3 per cent rise analysts had expected. Strong demand for fresh food, particularly produce and high-quality meats, boosted those sales.

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 The company noted that higher-income customers, especially those earning over $100,000 annually, significantly contributed to home furniture, appliances, clothing, and toys sales, leading to broad market-share gains in these categories. 

The retailer reported a 16 per cent increase in membership and other income during the quarter, contributing to a 22 per cent rise in US online sales. Walmart's US business generates 60 per cent of its nearly $650 billion in annual sales. 

Groceries, which make up roughly 60 per cent of Walmart’s US sales, have continued to boom, and the retailer is gaining traffic, market share and shoppers across income cohorts.

Walmart forecast annual adjusted profit per share to be between $2.35 and $2.43 and consolidated net sales to grow from 3.75 per cent to 4.75 per cent. Both forecasts were higher than its prior expectations of $2.23 to $2.37 per share and three per cent to four per cent sales growth.

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Walmart's second-quarter earnings were 67 cents per share, beating analysts' expectations of 65 cents. Overall revenue rose 4.8 per cent to $169.3 billion, beating Wall Street forecasts of $168.53 billion. 

International sales rose 8.3 per cent led by Walmex and China. Comparable sales growth in China increased 13.8 per cent due to strength at Sam’s Club and in e-commerce. Walmex saw strong sales in food and consumables.

The company’s general merchandise sales grew after 11 consecutive quarters of declines. The category has higher margins and dragged on the business in recent years as consumers pulled back from discretionary items. Walmart said its broader assortment of these products is drawing consumers.

With inputs from Bloomberg, Reuters