Wealthy shoppers have flocked to Walmart in greater numbers, helping the nation’s largest retailer overcome inflation headwinds faced by rivals and fuel better-than-expected quarterly results, the company said Thursday.
Walmart said total US comparable sales rose 3.8% in its first quarter ended April 30 — with the bulk of the gains coming from households with an income of $100,000 or more.
“We are seeing customers trade into Walmart,” Chief Financial Officer John David Rainey told Bloomberg.
“We’ve historically been thought of for value, but now it’s value, quality and convenience.”
The average bill at the till was flat but the number of transactions rose.
Analysts expected those sales to climb 3.15%, according to LSEG.
Wealthier customers also boosted the retailer’s online sales, accounting for most of the 22% spike in e-commerce sales in the quarter, the company said.
The Bentonville, Ark.-based behemoth raised its full-year forecast, sending shares of the company soaring 6.5%.
Growth was driven by its pickup and delivery services and increased sales of items like men’s, women’s and kids’ apparel through its third-party marketplace, which now offers more than 420 million items of mostly discretionary products.
“These are not inflation-driven results,” chief executive Doug McMillon said on an earnings call.
“Whether the environment is inflationary or deflationary, whether customers have more money or less money, if we’re doing a good job on the items and prices and the service we provide” the company will continue to grow, he said.
While overall retail sales in the US were flat in April compared with the previous month, inflation has seemingly begun to lose steam.
The Consumer Price Index, which tracks goods and service costs, rose 3.4% in April from a year ago — easing from the previous month’s 3.5% spike and in line with economists’ forecasts.
The question is as inflation eases up will the retailer be able to hold on to these newer customers, Edward Jones analyst Brian Yarbrough said.
“Historically, Walmart has not been able to keep them after recessions end, but maybe this time is different as the speed of its delivery improves and its marketplace gives them access to better merchandise.”
While Americans have generally managed to navigate through higher prices, prolonged inflation has sparked worries that lower-income consumers might be more pressured and potentially slow down an anticipated recovery in spending.
Walmart executives said that lower-income consumers maintained their spending habits in the quarter but tended to prioritize cheaper items.
They also noted that the price gap between eating at home and dining outside had increased, boosting its grocery business which accounts for about 60% of total revenues.
A 45% increase in the number of food and consumables items it offered on discounts, which it calls rollbacks, in April resonated strongly with shoppers.
“As we continue to work closely with our suppliers to lower cost, we’re managing our … competitive price gaps and customers are responding favorably, resulting in sustained sales growth and higher gross margins,” Walmart’s finance chief John David Rainey said.
Walmart has likely also gained market share at rival Target’s expense, Yarbrough said.
A backlash against the company over its LGBTQ themed merchandise resulted in August in the company’s first quarterly loss in six years.
This month, Target is moving most of its LGTBQ merchandise in honor of Pride in June online, according to a Bloomberg report.
Despite the strong earnings, Walmart announced this week that it’s slashing several hundred jobs at its headquarters and asking remote workers to return to the office, consolidating most of its corporate offices into three locations as it revamps its corporate campus in Bentonville.
