As Walmart is prepping to report quarterly earnings results on Thursday, the multinational retail chain is also set to raise its full-year forecast as shoppers continue to grab essential items like groceries, reports Reuters.
Walmart is the largest retailer measured by sales, and U.S. consumers are steadily raising its sales figures with their intentions to continue shopping at Walmart when compared to Costco and Target for essential products, according to a monthly survey conducted by brokerage Stifel in August.
The survey results also reported that consumers plan to spend 16% less on back-to-school purchases this year compared to a year ago.
"We find the anticipated lower spending notable and a watch-point, as it suggests continued weakness in general merchandise categories," Stifel analyst Mark Astrachan said of the results.
Walmart also announced that it would sell 14 of the most popular items on school supply lists for the same prices as last year.
"As a retail bellwether Walmart's comments on back-to-school trends will be a market mover as well as a preview of potential holiday trends," D.A. Davidson analyst Michael Baker said, adding that back-to-school trends have led the direction of holiday sales in 23 of the last 29 years.
Walmart’s core business is setting it up for success against other retailers as economic stress has pushed more shoppers to turn to Walmart for groceries. Items like toilet paper, beans, pasta, and toothpaste bring consumers into its stores, presenting opportunities for cross-selling and up-selling for more profitable items (like pens, notepads, and backpacks), reports Reuters.
With more traffic in Walmart’s Supercenters, neighborhood markets, and even its online website for everyday items, the retailer issued upbeat second-quarter forecasts and raised profit and sales estimates for its fiscal year (ending January 2024).
In contrast, Target will report results on Wednesday and is expecting a drop in sales for its fiscal year with a smaller grocery footprint than Walmart. Instead, Target has focused on selling clothes, electronics, and beauty products.
According to the latest U.S. retail sales data, many shoppers are spending more on dining out, hobbies, and sporting equipment.
Apart from overall retail sales, food and beverage stores in particular (including grocery, beer, wine, and liquor stores), rose 3.5% compared to last year (July 2022). Pharmacies and drug stores increased 8.1% compared to last year, and general merchandise stores (including warehouse clubs and supercenters) rose 3.2% in the same timeframe.
Even though Walmart is known for its low prices, CEO Doug McMillon in May cautioned that stubborn inflation, especially in food, was "one of the key factors creating uncertainty for us in the back half of the year," said Reuters.
However, UBS, Credit Suisse, Telsey Advisory Group, and CFRA Research are among the brokerages that expect Walmart to raise its full-year forecast for the second time this year.
Also, In May, Walmart forecasted net sales would increase about 3.5% this fiscal year in part due to higher prices (up from its prior outlook in February), where it also raised its earnings forecast.
