Walmart Earnings Expected to Rise as Consumers Spend More on Necessities

Walmart (WMT), America’s biggest retailer by revenue, is expected to report a rebound in earnings on solid growth in same-store sales, as cash-strapped consumers spend more on necessities amid an economic slowdown and persistently high inflation.

Net income (NI) is projected at almost $3.5 billion, up 70% from the same quarter last year, according to estimates compiled by Visible Alpha. Earnings per share (EPS) are forecast to be unchanged at $1.30. U.S. comparable store sales, which account for the majority of Walmart’s nearly $150 billion in revenue, likely rose 4.6% from a year ago, outpacing a 3% annual increase in the same quarter last year. Walmart will report its fiscal year 2024 first quarter results before markets open Thursday.

U.S. consumers are spending a greater share of their disposable income on necessities such as gas and groceries amid an economic slowdown and persistently high inflation. At the same time, they’re pulling back on big-ticket and discretionary purchases.

This trend could benefit Walmart, which for years has lured shoppers with low prices on everyday necessities. A study by consumer advocacy nonprofit Consumers’ Checkbook, which tracked the prices of 154 common grocery items, found that prices at Walmart were 16% lower than the average among stores they surveyed at the end of 2022.

Food and beverages now account for 60% of Walmart’s revenue, versus a 21% share at Target (TGT). Food prices in the U.S. rose 7.7% year-over-year in April, outpacing a 4.9% increase in the broader Consumer Price Index (CPI). Prices for food at home, a category that includes groceries, were up 7.1% compared to April of last year. Walmart has resisted raising prices at that rate this year, undercutting competitors like Amazon (AMZN) and Kroger (KR).

Walmart shares are up just over 5% year-to-date, outperforming an about 1.5% gain in the broader consumer staples sector over the same period.