Key points:

  • Walmart reported better-than-expected quarterly results. Adjusted earnings per share were 60 cents, beating estimates of 52 cents.
  • Most of the online profits came from households with annual incomes over $100,000.
  • Walmart’s strong results could have a negative impact on other retailers.

Walmart reported better-than-expected quarterly results. The company also raised its full-year forecast, expecting sales of food and non-food items such as clothing and electronics to increase due to lower inflation. The company’s shares rose to a record high, posting their biggest one-day gain in four years.

The company’s report sparked a rally

Shares of Walmart, the largest U.S. retailer, rose 7% on Thursday to a record high of $64.22, marking their sharpest one-day gain since March 2020. This price surge helped the Dow Jones Industrial Average top 40,000 for the first time.

Walmart’s CEO attributed the company’s growth to increased purchases from wealthier customers both in stores and online, as well as the company’s price advantage over competitors. In its report for the first quarter ended April 30, Walmart reported U.S. comparable sales growth of 3.9% (excluding fuel). The average bill remained unchanged, but the number of transactions increased. LSEG analysts predicted sales growth of 3.15%.

Consumer behavior

Walmart saw sales growth driven by both online services and increased demand for certain product categories. The company’s pickup and delivery services have become especially popular, and sales of clothing for men, women and children have grown significantly.

According to the company’s report, the majority of online gains came from households with annual incomes above $100,000. While Americans overall were able to cope with rising prices, persistent inflation is raising concerns that low-income consumers could face greater hardship, potentially slowing the expected recovery consumer spending.

Walmart executives note that low-income shoppers did not change their habits this quarter, but began to prefer more affordable products. There has also been an increase in food price differentials between stores and restaurants, driving growth in food sales, which account for about 60% of the company’s total revenue.

For the fiscal year ending January 2025, Walmart forecast sales will top or slightly exceed its forecast of 3% to 4% growth and adjusted earnings per share will top or slightly exceed its previous estimate of $2.23 to $2.37.

Walmart beats the competition

Walmart’s strong first-quarter financial results could be a warning sign for other retail players. The company’s results indicate that the company is actively gaining market share from competitors.

Target’s rival will also report its quarterly results on May 22. Target’s results are expected to be less impressive than Walmart’s.

Walmart reported first-quarter adjusted earnings of 60 cents per share, well above the average estimate of 52 cents. The company’s total revenue of $161.51 billion was also higher than expected.

These results suggest that Walmart is successfully managing inflationary pressures and maintaining strong consumer demand.