Walmart earnings boosted by more higher income customers

Walmart rang up more customers with higher household income during the second quarter as high inflation reshapes consumer behavior.

Driving the news: CFO John David Rainey told CNBC ahead of the company's earnings report this morning that a vast majority (about 75%) of Walmart's market share in grocery in the second quarter came from shoppers with $100,000 or more in annual household income.

• Budget-strapped shoppers have also been trading down "in terms of quality and quantity," he added.
• Walmart's stock rose more than 3% in premarket trading.

Why it matters: While higher income households have felt better about the economy than lower income households, Walmart's observation reflects the overwhelming impact higher prices have had across nearly all households.

• Groceries and food products, considered staple purchases for households, are lower margin for stores like Walmart. But being able to offer a wide mix is clearly helping the retailer weather the downturn in demand for nice-t0-haves, such as home goods, sporting equipment, electronics and clothing.

Catch up fast: Walmart reported $5.1 billion in net income for the second quarter.

• Its same-store sales growth reached 6.5% from last year, higher than what analysts expected and what the company guided for previously.
• The company restated its forecast for the rest of the year as it continues to clear excess inventory.

What they're saying: "[A]s you can see, in our guidance, we acknowledge reality," CEO Doug McMillon said at the end of the earnings call.

• "The world ... is feeling various pressures, most pronounced — inflation."

The big picture: Retailers have had a tough time during the pandemic trying to keep up with how quickly consumer buying behaviors changed, starting with supply shortages amid record demand and now, record inflation.

What to watch: Walmart says fuel prices will play a big role in the future price of food and goods — not only to its own transportation costs and therefore ultimately costs to the consumer, but also to consumer pocketbooks as they decide how much they can spend on anything else.

• The company was also optimistic about the fall quarter, with schools back in person and reduced lunch programs expected to drive purchases of supplies and food.