May 21 (Reuters) - Walmart stuck to its annual targets on Thursday, betting on demand for cheaper grocery from value-seeking consumers as well as growth in its ecommerce business against a strained economic
backdrop in the U.S.
The retail bellwether has kept prices on groceries and everyday essentials low amid tight household budgets as the cost of fuel jumps to more than $4 a gallon in the U.S. and inflation remains elevated.
U.S. retailers have flagged growing pressure on consumer spending this year, with sentiment falling to a record low in May and inflation posting its largest gain in three years.
The Iran war has also pushed up costs of some raw material such as resin and other packaging goods, further pressuring supply chains still recovering from the sweeping tariffs on imports last year.
Walmart retained its target of annual net sales growth of 3.5% to 4.5% and adjusted earnings per share of $2.75 to $2.85. Analyst had called this forecast conservative in February, expecting the company to raise them through the year.
CAUTIOUS SECOND QUARTER
While Walmart has been so far largely insulated from the impact of weak spending, the retailer under CEO John Furner was cautious about its second-quarter expectations, forecasting sales and profit below estimates.
Higher fuel costs impacted Walmart's operating income by about 250 basis points, and the company said it tried to absorb these costs in its delivery fulfillment operations to keep prices low.
"While consumers are telling us they're feeling some pressure, sales strength has persisted and we saw one of our strongest quarters of share gains," the company said.
Smaller rival Target raised its annual sales forecast on the back of its nascent turnaround plan, but executives called for some caution, while grocers Kroger and Albertsons provided conservative annual forecasts.
Walmart, which topped first-quarter comparable sales estimates, has been attracting more higher income shoppers who are seeking convenience and signing up for its delivery services.
Ecommerce sales jumped 26% in the first quarter and its contribution to total sales was up sharply from a year ago.
The company's U.S. gross profit grew 29 basis points, helped by growth in its membership revenue and advertising.
"Our results reflect our continued focus on delivering across the enterprise — better shopping experiences, a broader assortment, and faster delivery," Furner said.
The company's first-quarter total U.S. comparable sales, excluding fuel, grew 4.1%, compared with estimates of a 3.8% rise, according to data compiled by LSEG.
It expects second-quarter net sales to increase 4% to 5%, compared with estimates of a 5.09% rise and adjusted earnings per share of 72 cents to 74 cents, versus expectations of 75 cents.
(Reporting by Juveria Tabassum in Bengaluru and Nicholas P. Brown in New York; Editing by Arun Koyyur)
