(Bloomberg) -- Walmart Inc. raised its sales guidance for the full year, as the chain expects to draw shoppers searching for deals.
The Bentonville, Arkansas-based company said it 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 targets for operating income and profits.
“We are seeing that the consumer continues to be discerning, choiceful, value-seeking” and focusing on essentials, Chief Financial Officer John David Rainey said in an interview on Thursday. “We are not seeing any incremental fraying of our customers’ financial health.”
Walmart shares rose seven per cent in premarket trading in New York. The stock is up 31 per cent year to date through Wednesday’s close, compared with a 14 per cent gain for the S&P 500 Index.
In recent weeks, investors have tried to make sense of murky job markets and stock volatility by looking at companies for clues. Walmart’s bullishness points to an increasingly choosy U.S. consumer facing economic uncertainty and high interest rates. Americans are also pulling back on travel, while deferring big home renovations. Retailers spanning Home Depot Inc. to Wayfair Inc. have signaled a weakening spending environment.
Each month of the quarter remained relatively consistent, and there was no pullback during the latest quarter in July. Higher guidance is a reflection of the company’s outperformance in the first half of the year, Rainey said, adding that uncertainty still lingers due to the upcoming U.S. election and geopolitical unrest in the Middle East.
Walmart said comparable sales in the U.S. rose 4.2 per cent, excluding fuel, last quarter driven by higher units and transactions. Analysts expected a gain of 3.4 per cent for the metric, which captures revenue generated online and in stores open at least a year. It posted adjusted earnings of 67 cents a share, topping the analysts’ average estimate of 65 cents.
Its sales of general merchandise, which includes products like appliances and clothes, grew after 11 consecutive quarters of declines. The category, which has higher margins, has dragged on the business in recent years as consumers focused more on essentials.
Lawn, garden and seasonal products such as pool noodles were standouts during the quarter. Combining all pool noodles Walmart sold would stretch out to 30,000 football fields, Rainey said. Back-to-school season is off to a healthy start, with stationery being popular.
“Clearly, we see in this economic backdrop that we are quite relevant to our customers and members,” Rainey said.
The shift toward more penny-pinching has propelled Walmart’s business over the past several quarters, making it an outlier among consumer companies generally facing weaker demand. Over the quarter, Walmart added more discounts, which rose 35 per cent in food.
Groceries, which make up roughly 60 per cent of Walmart’s U.S. sales, have continued to boom, and the retailer is gaining traffic, market share and shoppers across income cohorts. In particular, wealthier shoppers have been a meaningful driver.
E-commerce grew 22 per cent in the U.S., as the operator of about 4,600 stores relies on its vast network of physical locations to fulfill online orders. The company is also investing in advertising, third-party marketplace and other newer businesses that have higher profit margins. Walmart’s U.S. e-commerce business is approaching profitability, a crucial piece of the puzzle in its competition against Amazon.com Inc.
Walmart’s 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.
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