Walmart Sales Surge as Higher-Income Shoppers Flock to Retailer

amazon, walmart sales surge as higher-income shoppers flock to retailer

Shoppers at a Walmart store in Secaucus, New Jersey, US, on Tuesday, March 5, 2024. Walmart is revamping more than 800 store locations and adding high-end products.

(Bloomberg) -- Walmart Inc. breezed to another quarter of sales growth and said it now expects the full year to be slightly better than planned as the big-box retailer attracts price-conscious consumers looking for essentials and discounts.

Sales rose 3.8% at US Walmart stores open at least a year for the quarter ended April 26, higher than what Wall Street was anticipating. With inflation easing, the average ticket was flat but the number of transactions rose by 3.8% from a year ago. E-commerce was a big driver, jumping 22% during the same period, as well as upper-income households that the retailer said drove the bulk of its gains.

amazon, walmart sales surge as higher-income shoppers flock to retailer

Shoppers at a Walmart store in Secaucus, New Jersey, US, on Tuesday, March 5, 2024. Walmart is revamping more than 800 store locations and adding high-end products.

Walmart now expects adjusted earnings to come in at the high end or slightly above its original guidance of $2.23 to $2.37 per share and revenue growth of 3% to 4% for the full year. Analysts are expecting adjusted earnings of $2.37 per share and a revenue increase of nearly 4% for the full year.

amazon, walmart sales surge as higher-income shoppers flock to retailer

Shoppers at a Walmart store in Secaucus, New Jersey.

The shares were little changed at 7 a.m. in New York trading before the start of regular trading. The stock has gained 14% so far this year through Wednesday’s close, outpacing the 11% rise in the S&P 500 Index.

Sales growth are fueled by traffic and unit increases, Chief Financial Officer John David Rainey said in an interview on Thursday.

“We are seeing customers trade into Walmart,” he said of higher-income households who were the largest cohort behind share gains in nearly every category. “We’ve historically been thought of for value, but now it’s value, quality and convenience.”

The grocery business has been fueling Walmart’s growth, though general merchandise has lagged. Consumer sentiment dropped in early May to a six-month low due to concerns about inflation and the job market, while retail sales stagnated in April. Still, a measure of underlying inflation cooled in April for the first time in months, boding well for Federal Reserve officials looking to start cutting rates this year.

Consumers that are prioritizing staples over larger, discretionary purchases has dented sales of competitors such as Home Depot Inc. and Target Corp. But as higher-income consumers trade down or search for deals, Walmart is benefiting from a decision to roll out more discounts and new products and revamp stores. Lower-income consumers are buying in similar patterns at Walmart, Rainey said, purchasing more groceries and other necessities than general merchandise.

Walmart continues to expand its e-commerce business and shipped about 4.4 billion units for same-day or next-day delivery over the past 12 months, Rainey said. About 44% of those orders were delivered to customers in less than four hours after ordering. By comparison, Amazon.com Inc. said last month that it shipped more than 4 billion items to Prime members via same or next-day deliveries in 2023.

Rainey said the company has also been focused on keeping costs down, pointing to a 4.2% decline in inventory levels in the US for the quarter as supply normalizes after the pandemic.

Earlier this week, Walmart announced plans to shutter smaller offices and lay off hundreds of employees who are still working from home or can’t move to bigger office hubs. Most relocations will be to the retail giant’s corporate headquarters in Bentonville, Arkansas, where Walmart is building a 350-acre campus.  Some employees will be able to work from offices in the San Francisco Bay Area or in Hoboken, New Jersey.

Rainey said the recent relocation moves are about having staff work together and that most of the changes will be done by the third quarter of this year.

“We, like a lot of companies, have relaxed those policies during Covid in the last few years and we think it’s important to get back together. We see the benefit of that,” he said.

Walmart is also investing in non-retail businesses, including advertising, that have faster growth and higher margins than core operations, while exiting areas like health clinics that are proving costly. Newer business lines, including its Walmart+ membership program, fueled the company’s operating income growth for the quarter.

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