Walmart cautious despite strong q4: ‘prices are still high’

EXPLORE MORE Walmart on Tuesday reported strong sales during the holiday season as budget-conscious consumers looking for better deals on groceries and other items flocked to its stores. The

report was a good showing for the company, considering consumers had cut back on their overall spending during the traditional November-December shopping period. Though sales rebounded at

stores and restaurants last month, showing shoppers are still spending despite higher prices and several interest rate hikes by the Federal Reserve in an effort to curb the problem. The

nation’s largest retailer also delivered full-year sales of $611.3 billion, up 6.7% compared to the prior year. But it gave cautious guidance for the next fiscal year, saying it expects

sales to increase between 2.5% to 3% and US sales to jump 2% to 2.5%. And it forecast adjusted earnings per share ranging from $5.90 to $6.05, excluding fuel. Analysts surveyed by FactSet

forecast $6.52 per share, on average. Shares rose less than 1% in early morning trading. Also on Tuesday, Home Depot posted strong profits in its final quarter of 2022, but a muted outlook

for this year sank its shares before markets opened. Amazon, which reported strong fourth quarter sales earlier this month, has also warned about a slower growth period for the coming

months. NEVER MISS A STORY Sign up to get the best stories straight to your inbox. THANKS FOR SIGNING UP! Walmart executives told analysts on a call that their guidance reflects the unknowns

in the economy as consumers face rising interest rates, delinquencies and are putting less money in their savings. “While the supply chain issues have largely abated, prices are still high

and there is considerable pressure on the consumer,” said Chief Financial Officer John David Rainey on the call. Rainey said the company’s earnings projections are also based on other

factors, such as expenses from more interest payments and its planned buyouts of South African retailer Massmart and the robotics firm Alert Innovation. Walmart saw a boost during the

pandemic as homebound shoppers spent more on discretionary items like décor to beautify their houses. But consumers are now focusing more on necessities like groceries, which left the

company with a glut of excess inventory and dented profits it could make from high-margin discretionary merchandise. The big-box retailer has noted shoppers have been watching how they spend

and trading down to private brands in categories such as baking goods in order to save costs. That shift, which began last March, accelerated more during the fourth quarter, executives said

on the call Tuesday. High-income shoppers looking for deals on groceries have also been flocking to its stores, and the company has said its looking to retain them by offering fresh food

and clothing assortments. December was the largest sales month in Walmart’s history, led by food sales, Rainey said. Meanwhile, the company saw a slight decline in general merchandise sales,

such as toys, electronics, apparel and home items. Walmart CEO Doug McMillon noted the retailer also ended the quarter with its once-bloated inventory flat compared to last year, which he

said was better than they anticipated. The company reported revenue of $164 billion in the quarter that ended on Jan. 27, up 7.3% compared to the same period last year. Profits reached $6.28

billion, up from $3.56 billion last year. Meanwhile, per-share earnings adjusted for one-time costs and benefits were $1.71, beating Wall Street expectations of $1.52. Overall, holiday

sales in November and December rose a weaker-than-expected 5.3%, a slowdown from 13.5% in 2021, according to the National Retail Federation. Major retailers, including Walmart and Target,

began offering discounts in October to help consumers spread out their spending. And Black Friday doorbusters, which typically drew massive crowds, were also exchanged for weeks-long

discount events. At Walmart, comparable sales — those from established stores and online operating over the past 12 months — rose 8.3%, slightly higher than 8.2% from the previous quarter.

Online sales rose 17%. Sam’s Club, which is owned by Walmart, reported sales growth of 12.2%. Company executives said on the call that its seeing membership growth among mid to high-income

households, as well as millennials and Gen Z.