fbpx
Absa Bank Kenya Partners with Huawei to Build a New Digital Foundation for Branch NetworksRead more Stylish and compact, these new Canon instant printers make creative pursuits easyRead more Nigerian Law Enforcement agencies open investigations on Hawilti and company executives for criminal breach of trust, cheating, defrauding investors schemeRead more Famine looms in Somalia, but many ‘hunger hotspots’ are in deep troubleRead more Launch of the 3rd Edition of the Choiseul Africa Business Forum, a Must-Attend Event for the Business Community in Africa October 19th & 20th, 2022 in Casablanca, MoroccoRead more World’s Biggest Afrobeats Music Festival Afro Nation Extends Partnership with APO Group until 2025Read more Master Trainer (MT) National Meeting on Sustainable Coffee Practices Organized by The International Islamic Trade Finance Corporation in Collaboration with The Sustainable Coffee Platform of Indonesia (SCOPI)Read more Thai Ambassador met the Thai Community in Dar es Salaam and Zanzibar and visited the Buddhist Temple in TanzaniaRead more Generation Africa awards US$100,000 to two young agripreneurs from Kenya and Uganda in the fourth annual GoGettaz Agripreneur Prize Competition at the African Green Revolution Forum Summit in Kigali, RwandaRead more Medicaid Cancer Foundation and AstraZeneca celebrate Prostate Cancer Awareness month with the launch of Project Icon NigeriaRead more

Walmart results top estimates as inflation alters consumer behavior

show caption
Walmart is seeing elevated demand for grocery items due to inflation, but less interest from consumers in apparel and electronics./AFP
Print Friendly and PDF

Aug 17, 2022 - 07:32 AM

NEW YORK — Walmart scored a big jump in revenues partly driven by inflation but the retail giant faces increasing evidence of shifting consumer behavior due to rising prices, according to quarterly results released Tuesday.

The big-box retailer, which stunned Wall Street three weeks ago by cutting its profit forecast, ended up reporting better-than-expected results for the latest three months, following a late-July improvement in business.

The chain even tweaked its latest profit forecast in a positive way as ebbing gasoline prices and a rise in back-to-school shopping boosted activity.

The news sent shares higher, however, executives continued to signal they expect the headwinds facing customers to persist.

“I think this inflationary environment is going to last for a while,” Chief Executive Doug McMillon said on a conference call with analysts. “So people are going to be value conscious, which plays to our strength.”

Revenues for the second fiscal quarter ending July 31 rose to $152.9 billion, an 8.4 percent increase from the same period of last year.

Profits jumped 20.4 percent to $5.1 billion, though some of the increase was connected to the accounting for an asset sale in Brazil.

‘Trading down’ 

Walmart’s US comparable store sales rose 6.5 percent from a year ago, but the company expects the pace to slow to about three percent growth in the second half of 2022.

Higher gasoline prices, along with elevated costs for grocery staples have prompted more consumers to “trade down” to lower-priced goods.

An example has been in a shift from deli meats at higher prices to purchases of hot dogs, and canned tuna and chicken, said Chief Financial Officer John Rainey.

In general, as consumers have to spend more on groceries, demand has fallen for apparel, electronics and home products, leading to more promotions in these areas.

Rainey said the company also had to cancel “billions of dollar” in orders to address inventory gluts.

“The swings we’ve seen in consumer behavior through the pandemic shifting from in-store to online, along with big swings in the purchase of goods versus services and then the reversion back to pre-pandemic norms have been sharp and difficult to predict,” Rainey said.

“These trends have been exacerbated by inflationary pressure on the consumer that many of us have not experienced in our lifetime.”

On July 25, Walmart cut its earnings forecast, saying shifting consumer behavior was denting sales of merchandise with higher profit margins.

The company now projects its full-year adjusted profit will decline nine to 11 percent. That is still worse than the May outlook but, a smaller drop than the 11 to 13 percent plunge expected three weeks ago.

Neil Saunders of GlobalData Retail said Walmart’s results demonstrate the advantages of its position at a time when consumers are worried about higher prices, but the company also faces challenges.

“Walmart is fighting a battle on two fronts,” Saunders said in an analysis. “One is to retain its position as a price leader and grow its food business. Here, we are optimistic about its prospects.

“The other is to punch out better operating profit numbers. This will be more challenging as the business is facing higher costs and unfavorable sales mix trends.”

Walmart is trying to boost its non-retail business, most recently unveiling a venture with the Paramount+ streaming service, which will be included in the company’s Walmart+ subscription program.

The new benefit will launch in September, according to a joint news release announcing the venture.

Shares of Walmart rose 5.6 percent to $140.04 in mid-morning trading.

MAORANDCITIES.COM uses both Facebook and Disqus comment systems to make it easier for you to contribute. We encourage all readers to share their views on our articles and blog posts. All comments should be relevant to the topic. By posting, you agree to our Privacy Policy. We are committed to maintaining a lively but civil forum for discussion, so we ask you to avoid personal attacks, name-calling, foul language or other inappropriate behavior. Please keep your comments relevant and respectful. By leaving the ‘Post to Facebook’ box selected – when using Facebook comment system – your comment will be published to your Facebook profile in addition to the space below. If you encounter a comment that is abusive, click the “X” in the upper right corner of the Facebook comment box to report spam or abuse. You can also email us.