Walmart’s third-quarter earnings beat Wall Street’s estimates, but the retailer’s cautious outlook and weaker consumer spending lead to a slide in its shares. Despite strong sales, Walmart foresees a lower-than-expected forecast for the year, amidst consumer hesitance in spending.
Walmart’s Earnings and Outlook
Walmart topped Wall Street’s fiscal third-quarter earnings estimates as sales rose, but the company struck a cautious tone with its outlook. Despite touching an all-time high the previous day, the company’s shares slid in premarket trading after it gave a lower-than-expected forecast for the year as it enters the holiday shopping season. It anticipates adjusted earnings per share of $6.40 to $6.48 for the year, lower than analysts’ expectation of $6.48, but higher than its previous range.
Consumer Spending Trends
Walmart indicated a consumer trend of leaning heavily into major promotions, watching their spending, and searching for deals. The company observed a drop in purchases before and after sales events as customers held out for lower prices. However, sales of items like clothing picked up as holiday promotions gained momentum at the start of the holiday quarter.
Quarterly Performance and Factors Affecting Sales
In the third quarter, Walmart’s net income rose, and revenue increased from the year-ago period. The growth was driven by the strength in the retailer’s grocery business amidst high inflation, and a surge in digital sales. The U.S. saw improved customer transactions and higher e-commerce sales. Walmart’s ad business, Walmart Connect, also saw a significant jump in revenue.
Market Response and Comparison with Rivals
Investors have shown concern as Walmart’s shares slid amid a cautious outlook. Despite outperforming retail rivals during an inflationary period, Walmart’s stock faced pressure after its outlook announcement. Additionally, Target’s performance, which exceeded expectations for earnings and revenue despite a year-over-year sales decline, also affected market sentiment.