Walmart boosts outlook while warning that higher costs loom

Walmart Inc. raised its full-year sales and profit outlook, a sign the world’s biggest retailer is winning over price-sensitive shoppers while absorbing rising costs. The company now sees net sales rising 4.8% to 5.1%, higher than its previous projection in August. It marks a second increase in the forecast during the fiscal year.

The results are likely to alleviate some concerns that consumers are pulling back amid a cooling job market, corporate layoffs and rising prices. Rival big-box chains have warned that consumers remain cautious, increasing attention on the world’s largest retailer as it prepares to enter its next chapter under a new chief executive officer next year.

"We are keeping a keen eye on what’s going on with the consumer, but feeling good about our business overall,” Chief Financial Officer John David Rainey said in an interview, adding that the company is seeing higher costs. “There’s still some pressure and, perhaps, more pressure that we can see over the coming months."

E-commerce was among the bright spots. Walmart continues to broaden delivery areas, lower shipping costs, and expand its third-party marketplace, he said. Customers across income cohorts continue to pay up to receive goods faster.

The company separately announced it is transferring the listing of its stock to the Nasdaq Stock Market to begin trading there on December 9, a move to reflect its focus on tech. The shares rose 3.7% at 9:37 a.m. in New York. The stock had gained 11% so far this year through Wednesday’s close, slightly less than the advance of the S&P 500 Index over the same period.

Also Read: Walmart’s international sales jump 10.5%, India and China lead growth

The company, based in Bentonville, Arkansas, has gained market share across income groups with low prices, a wide assortment and burgeoning digital services. Its grocery business, which accounts for about 60% of US sales, is helping fuel demand as consumers prioritise necessities. In recent years, Walmart has drawn in more affluent shoppers with online services and fast deliveries. Its digital offerings now include luxury items like pre-owned Chanel bags and other accessories.

Consumer spending has been largely consistent, Rainey said, though there’s “some slight moderation” within lower-income households. Middle- and higher-income shoppers aren’t pulling back, with the latter spending more in some areas. Disruptions in food stamps resulted in a temporary softness in sales during the quarter, though that has since rebounded, he said.

Overall, business remained consistent month-to-month during the quarter, executives said on a call with analysts. Sales of clothes, home and other non-food products rose. The holiday season is off to a good start, Rainey said. At Sam’s Club, Walmart’s warehouse chain, mahjong sets were highlighted as a top item this season.

Prices rose 1% during the latest quarter in the US at Walmart, suggesting that the retailer has been able to minimise inflation from tariffs. The company is absorbing some costs and passing on others, while working closely with suppliers to keep prices as low as possible and sourcing goods from other regions when necessary.

Within food, beef prices remain high while eggs are expected to get cheaper, executives said. More than half of Walmart’s rollbacks — or discounts — are currently on grocery items. The company is also incorporating artificial intelligence across its operations and has teamed up with OpenAI to enable shoppers to purchase its products on ChatGPT.

Also Read: Walmart names John Furner as next CEO as Doug McMillon announces retirement

Walmart is among the latest retailers to post quarterly results. Target Corp. and Home Depot Inc. reduced their full-year outlooks after weaker-than-expected quarterly sales. Other consumer-facing companies, such as restaurant operators, have warned that younger consumers are spending less.

CEO Transition

The current quarter will be the company’s last under the direction of CEO Doug McMillon, who plans to retire next year. John Furner, who has led the company’s US business since 2019, will replace him. McMillon will remain on the board until June and be an adviser through the end of next fiscal year.

McMillon, who started working at the retailer in his teens, has been credited for transforming the company into a digital powerhouse consisting of e-commerce, advertising and marketplace businesses. Walmart’s stock has quadrupled during his tenure.

Like McMillon, Furner has spent decades at the retailer. His father worked for Walmart, and Furner started as a part-time employee in the garden center at a store in Arkansas. Furner, who had long been viewed as a successor to McMillon, will look to usher Walmart into the AI age and continue growth amid fierce competition. Walmart said it will name Furner’s replacement before the end of the fiscal year.

"I have been here at this table with this team for a long time,” Furner said, adding that he’s been part of developing the company’s strategy for automation and other technology investments and that the company will look to build on its momentum.

Also Read: Walmart plans 1,500 corporate job cuts in restructuring to simplify operations

Consumers continue to spend at Walmart in any economic environment, and the company has become a more convenient place for people to shop, McMillon said, as analysts and executives thanked him for his tenure. "We are not just known for price, we’re known for more than that now, and the runway looks like a long one to me," McMillon said.