Walmart’s profits helped ease fears of a recession, as the retail giant saw its like-for-like sales rise nearly 4 percent in the first three months of the year.
The strong performance of the nation’s largest retailer could ease some investors’ fears about a decline in U.S. consumer spending.
But CEO Doug McMillon also talked about prices at its 4,600 stores — and what shoppers can expect.
“Costs for general merchandise are now lower than they were a year ago, which is great, but they are still higher than they were two years ago for similar items,” he explained.
The retailer, he added, continues to see “high single-digit to double-digit cost inflation” on so-called “dry food and consumables” like paper, napkins, sugar, coffee, flour and cereals.
Walmart’s revenue increased 6% to $161.51 billion in the first quarter of the year.
“We all need these prices to come down,” he added. “The persistently high inflation rates in these categories that have lasted for so long are taking a toll on some of the families we serve.”
McMillon and other executives were eager to say that Walmart has a “price gap” over its competitors, meaning it charges less.
“Price really matters to the Walmart shopper,” said John Furner, president and CEO of U.S. Stores.
“We are happy with the price differentials we are seeing in the market,” he told analysts.
He also said the chain is increasingly selling its own-brand groceries as shoppers look to save money and cut back on purchases of brands like Coca-Cola.
Of the chain’s famous “discount” pricing, Furner said, “We’ve been able to keep a number of items either on a discount program or at base prices that allow customers to buy major holiday meals for the same price they bought them for the year. Before.’
However, he warned that it is “not easy to predict” whether they will be able to maintain these seasonally lower prices later in the year due to inflation in dry groceries.
The two were speaking to investors as Walmart reported its first quarter 2024 results.
The company beat its earnings and revenue expectations for the first quarter of the year, as the price gap between cooking at home and dining out continues to widen and the chain continues to expand. attract higher income buyers.
It was a strong performance for the country’s largest retailer, with revenue up 6 percent to $161.51 billion from $152.30 billion in the same period last year.
The retail giant now expects its sales for all of 2024 to be at the high end, or even slightly above its previous forecast of 3-4% growth.
“Most Americans remain uncomfortable with food prices and are still actively looking for ways to control their spending,” Neil Saunders, an analyst at GlobalData Retail, said in a note to clients Thursday.
This worked in “Walmart’s favor and allowed the chain to continue to acquire new customers.”
Chief Financial Officer John David Rainey told CNBC that customers are choosing to buy more groceries at the store as the cost of dining at restaurants continues to rise.
The retailer also is attracting more high-income shoppers attracted by the stores’ convenience, Rainey said.
“Higher-income households continue to account for the majority of the gains,” Rainey told analysts during Thursday’s earnings conference call.
“More and more customers are shopping with us, more often,” he explains.
The company’s shares rose about 6 percent in early trading following the news.
For the first time, Walmart’s delivery business generated more sales in terms of volume than in-store pickup.
“We have customers coming to us more frequently than before and newer customers that we haven’t traditionally had, and they’re coming to a Walmart, whether it’s an online virtual store or a one of our physical stores,” Rainey told CNBC.
The retailer also triumphed in its online sales, which rose 22% year-on-year, driven by increased orders for in-store pickup and online delivery.
The financial results mean the retailer expects to hit the high end of, or even beat, its guidance for the full year.
The company’s shares rose about 6% following the news, at one point hitting a record high of $64.22.
Walmart also generated profits from its global advertising business, whose activity grew 24 percent in the first quarter.
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