Walmart The company is due to report quarterly results on Thursday as investors and economists look for clarity on the health of U.S. households and the overall economic outlook.
According to LSEG’s consensus forecasts, analysts expect the following for big box retailers:
Earnings per share: 65 cents Revenue: $168.53 billion
As the nation’s largest retailer, Walmart is uniquely positioned to offer insight into where consumers are spending and saving their money. The company’s reputation for value has boosted sales over the past two years, and inflation has drawn more high-income shoppers to its stores and website.
July data from the U.S. Labor Department showed inflation easing back to historic levels: The Consumer Price Index, which measures the prices of a wide range of goods and services, rose 2.9% last month from a year earlier, the lowest level since March 2021.
But prices remain well above pre-pandemic levels, frustrating and hurting consumers. The Labor Department’s jobs report released earlier this month also raised concerns, showing slowing growth and a stronger-than-expected rise in the unemployment rate, sparking a sharp selloff in the stock market.
Earnings reports from some companies have further heightened concerns about the economy. Home Depot The company on Tuesday reported better-than-expected quarterly profit and revenue but warned of weaker sales in the second half of the year and growing consumer caution even among its middle- and upper-class customer base.
Walmart CEO Doug McMillon and Chief Financial Officer John David Rainey said consumer behavior remains consistent from quarter to quarter as people seek value and make careful choices about how they spend.
Steve Shemesh, a retail analyst at RBC Capital, said he and other investors will want to know whether that’s still the case.
“We’ll be monitoring any kind of change in tone,” he said.
Walmart’s reputation as a value chain and its huge grocery business have made it more resilient than its peers in tough economic times, when customers turn to its stores to save money. In May, the company said it expects full-year net sales growth of 3% to 4% and adjusted earnings per share of $2.23 to $2.37, at or slightly above the high end of its outlook.
Shemesh said alarm bells could sound if Walmart delivers disappointing results this quarter.
“The broader investment community will interpret this as, ‘Walmart is in trouble. Other companies are likely in even more trouble,'” he said.
On the other hand, if Walmart beats expectations, investors will need to analyze the earnings report carefully, he said.
“When Walmart outperforms, your instinct is, ‘OK, Walmart outperformed. Consumers are OK,'” he said. But he added that the company’s strong performance could also be due to even more affluent consumers turning to Walmart for a wider range of goods.
As it seeks to attract inflation-weary shoppers, Walmart has also been working on its own to drive growth. The company has looked outside traditional retail channels, adding more merchants to its third-party marketplace, selling more ads and working to grow membership to its subscription service, Walmart+. It also launched Better Goods, a new grocery brand with most items priced at $5 or less, including meal solutions like frozen pizzas and chicken wings that could be cheaper alternatives to fast food.
Walmart shares closed at $68.66 on Wednesday. The company’s shares have risen nearly 31% this year, outpacing the S&P 500’s gain of about 14%.
