It is probably some good news in the e-commerce market that Walmart have increased their full-year guidance and this is due to their increased sales in the grocery and online business. It is, however, worth noting that the grocery sales offset the weaker sales of clothing and electronics for the company. Walmart’s CFO, John David Rainey said, “We’re seeing in these economic indicators that there is some strain on the consumer, but the resilience has surprised us.” “And I think that’s partly probably because balance sheets are much stronger than they were pre-pandemic, even at this point.”
At the investors’ call, Rainey said, “Nearly 60% of its annual U.S. sales come from groceries. In the quarter, sales of general merchandise in the U.S. declined mid-single-digits, while sales of food and consumables increased low double-digits.” He also added that “consumers are buying fewer discretionary items, waiting for promotions before making pricey purchases like TVs and trading down to lower-priced items, such as buying a smaller box of cereal.”
However, this “weighed on the company’s first-quarter gross margin rate, which declined year over year, since food has slimmer margins than other merchandise.” Additionally, “Online growth was one of the bright spots of the quarter for Walmart. E-commerce sales jumped 27% year over year for Walmart U.S. At Sam’s Club, e-commerce sales grew 19%,” the report added. Walmart CEO Doug McMillon said persistently higher prices on everyday items like food and paper goods continue to squeeze families’ budgets month after month, leaving less money to spend in other ways. He mentioned that stubborn inflation “is one of the key factors creating uncertainty for us in the back half of the year.”
Rainey said, “Spending trends weakened as the quarter went on, with the sharpest drop after February,” and he believes that the end of pandemic-related emergency funding could be blamed for that because we already saw that people criticized the funding for letting others buy unnecessary items instead of what it was originally meant to do. Walmart added that “it expects consolidated net sales to increase about 4% and adjusted earnings per share to range between $1.63 and $1.68”.