May 16, 2024 - Economy

Walmart earnings show consumers still in spend mode

Illustration of the Walmart Spark being served up on a silver platter.

Illustration: Aïda Amer/Axios

The strength of Walmart's first-quarter results even surprised Walmart.

Why it matters: If the retail giant's earnings are truly a bellwether for consumer spending, one thing was confirmed Thursday morning — consumers are still spending on "value and convenience."

Between the lines: Walmart reported 6% revenue growth for Q1 compared to a year ago, including a 3.8% jump in U.S. comparable sales. And don't chalk it up to price hikes.

  • "These are not inflation-driven results," CEO Doug McMillon said on the company's conference call.
  • Executives said its customers are buying more stuff, and they're doing it more often.

Investors sent Walmart shares up 7% Thursday, which set a new high, as revenue growth exceeded the company's own guidance for the quarter.

  • "Our results were stronger than we anticipated," McMillon said on the call.

Still, the company did not raise its guidance for the full fiscal year, saying it now expects to "be at the high-end or slightly above" its previous forecast.

  • When asked by an analyst whether there was any concern around consumers, CFO David Rainey said, "I think we'd all agree that we're in far from a certain environment around the consumer ... given that we're one quarter into the year, we just want to be patient on this."

Reality check: "Many consumer pocketbooks are still stretched, and we see the effect of that in our business mix," Rainey said.

  • He said shoppers are spending more of their paychecks on non-discretionary categories and less on general merchandise like home goods and electronics.

Between the lines: "Value seekers" largely drove growth for the quarter, executives said, a trend the company started to observe last year.

  • Walmart said it gained market share in the quarter, driven by upper income households (over $100,000 annually), though it said overall engagement grew across all income groups.
  • The second catalyst, "convenience," was on display through a 22% jump in e-commerce at Walmart U.S., led by its store-fulfilled pickup and delivery, as well as its platform for third-party sellers.

The bottom line: Executives said Walmart's offering is built to withstand economic cycles. It certainly benefited from this one.

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