applescratch| Wal-Mart's sales continue to grow and its full-year performance forecast has been raised, making it the first choice for more and more Americans

SourceApplescratchWall Street news

According to Wal-Mart's latest quarterly report, more and more consumers choose to go to Wal-Mart to buy daily necessities and look for discounted goods, driving the company's revenue and profits to exceed market expectations. At the same time, Wal-Mart also raised its full-year earnings forecast.

On Thursday, May 16th, Wal-Mart reported Q1 results for fiscal 2025 (as of April 26). In the current quarter, the company had revenue of 1615.Applescratch0.1 billion US dollars, an increase of 6 percent over the same period last year, exceeding the market expectation of 159.58 billion US dollars. The increase was mainly due to an increase in the number of customer transactions, rather than an increase in the average value of each transaction, as more people went shopping at Wal-Mart.

In addition, Wal-Mart's composite gross profit margin rose 42 basis points to 24.1% due to improved earnings in various market segments, led by Wal-Mart in the U.S., and the company's adjusted earnings per share were 60 cents, higher than analysts' expectations of 53 cents.

Sales at Wal-Mart's old stores in the United States, which have been open for more than a year, rose 3.8% from a year earlier, exceeding expectations of 3.17%. As inflation eased, the average cost of a single purchase was flat, not as much as the expected increase of 1.32%, but the number of transactions increased by 3.8% over the same period last year. Among them, the performance of e-commerce is particularly outstanding, with an increase of 22% over the same period last year. Wal-Mart points out that high-income families are the main force driving its sales growth.

In terms of performance guidance, driven by these positive factors, Wal-Mart raised its full-year performance forecast and now expects full-year adjusted earnings per share to reach or slightly exceed the previous forecast of $2.23 to $2.37. Full-year revenue growth is expected to be between 3% and 4%. Analysts had expected Wal-Mart's adjusted earnings per share and revenue growth for the full year to be close to the high end of those expectations.

In response, Wal-Mart CEO Doug McMillon said in a conference call with analysts: "the company's recent performance growth is not driven by inflation." The increase in unit sales, the increase in trading volume and the increase in market share are the main factors driving the strong performance. The company is offering more discounts, which are resonating with more and more customers looking for value for money. "

Wal-Mart's shares rose as much as 7.3% after the quarterly results, the biggest increase since late 2022, pushing the company's shares to an all-time high since going public. By Wednesday's close, Wal-Mart's shares had risen 14% so far this year, outpacing the 11% rise in the s & p 500 over the same period.

Strong performance of e-commerce business

Wal-Mart highlighted its strong performance in global e-commerce, noting that "e-commerce penetration has increased in all markets around the world, mainly due to the self-service and distribution services implemented by stores and the promotion of market platforms."

Under economic pressure, consumers tend to buy necessities rather than luxury goods, affecting the overall dynamics of the retail market. With the increasing dependence of high-income consumers on distribution services, the distribution business is becoming more and more important for Wal-Mart. The company says such consumers are more likely to use delivery services, so Wal-Mart is improving its delivery efficiency and quality in a number of areas, such as the availability of orders, to attract and maintain this consumer group.

"We see customers turning to Wal-Mart," John David Rainey, Wal-Mart's chief financial officer, said in an interview on Thursday. These high-income families are the main force behind Wal-Mart's market share growth. "

Rainey noted that Wal-Mart is trying to cut costs in its e-commerce business while increasing the number of shipping orders, which are growing faster than self-contained orders. In the past 12 months, Wal-Mart has completed about 4.4 billion same-day or next-day shipping orders, of which about 44 per cent were delivered to customers within four hours. By contrast, Amazon said last month that it had delivered more than 4 billion items on the same day or the next day through its Prime membership service in 2023.

Rainey stressed that while Wal-Mart used to be known for providing value (affordable prices), now the company focuses not only on value, but also on product quality and shopping convenience. And as high-income consumers look for deals or more cost-effective goods, Wal-Mart benefits from decisions to introduce more discounts, new products and refurbished stores. The company says it is expected to renovate more than 900 stores this year.

By contrast, low-income consumers have shown stability in their buying model at Wal-Mart, focusing on food and other necessities rather than general goods. At the same time, the buying pattern of low-income consumers at Wal-Mart is similar to that of high-income consumers, spending more on groceries and other necessities than ordinary goods. "consumers' wallets are still tight," Rainey said, noting that customers spend more of their wages on necessities such as food and beauty, while spending less on ordinary goods with higher profit margins.

High-income consumers under economic pressure are also looking for discounts. At present, consumers prefer to buy basic necessities (such as food and household goods) rather than alternative commodities (such as furniture and electronics). This change in consumption patterns has had a negative impact on other retailers such as Home Depot and Target Corp., whose sales depend heavily on the consumption of non-essential goods.

At the same time, Wal-Mart's grocery business continues to drive its growth, while its grocery business lags behind. In the retail industry, groceries are often seen as basic demand, and sales are relatively stable even during an economic slowdown. Recent reports show that consumer sentiment fell to a six-month low in early May because of concerns about inflation and the job market. This negative sentiment may affect consumers' buying decisions, causing retail sales to stagnate in April.

Still, a potential inflation indicator in April cooled for the first time in months, boding well for Fed officials who want to start cutting interest rates this year.

Wal-Mart executives expect single-digit inflation in the prices of food and other consumer goods and median deflation in the prices of ordinary goods in the near future. This means that the prices of necessities such as food may rise slightly, but the prices of non-essential items such as clothing and household appliances may fall.

Wal-Mart executives also pointed out that they see opportunities to increase sales of general goods through its online marketplace. Because online marketplaces allow third-party sellers to sell goods on Wal-Mart's platform, which not only increases product categories, but also increases visits and sales to Wal-Mart's website.

Evercore analyst Greg Melich wrote in a report on Thursday that the uncertain consumption patterns of low-and middle-income U.S. consumers remain a challenge. "Given the continued market anxiety among Wal-Mart's core consumer group, the stock seems likely to benefit from today's results and solid guidance, which could provide some relief to the market," he noted. Wal-Mart continues to meet the needs of consumers of different income levels through its extensive product line and price advantages, while the company is also actively responding to market changes to maintain its leading position in the retail industry.

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