Walmart profits rise on strong sales from wealthier shoppers

Walmart reported higher profits Thursday
behind solid gains at US stores as the retail giant pointed to increased
purchases by wealthier shoppers and improving e-commerce sales.

Profits more than tripled to 5.1 billion USD for the quarter ending April 30
on a six percent rise in revenues to 161.5 billion USD. Earnings in the 2023
period were dented by exceptional losses in equity investments.

The results, which topped analyst estimates, lifted shares, which rose 6.3
percent in morning trading.

The improved sales to wealthier shoppers reflect a focus on affordable
pricing and convenience, as well as a greater attention to products such as
fresh food, company executives said on a conference call.

“We are not trying to chase higher-income cohort sales, we just offer
value,” said Chief Executive Doug McMillon.

The company splits shoppers into three income groups: below 50,000 dollars in
annual income; between 50,000 and 100,000 dollars; and above 100,000 dollars, with each
comprising about a third of the customer base, said Chief Financial Officer
John David Rainey.

“The word we’ve been using here is convenience,” Rainey said. “We are not
just a play for value anymore.”

But Rainey noted that many consumers are still strapped for cash due to
inflation, which has lingered and resulted in generally higher prices compared
with the pre-pandemic economy.

“Many consumer pocketbooks are still stretched,” Rainey said. “We see the
effect of this in our business is that they’re spending more of their
paychecks on non-discretionary categories and less on general merchandise.”

Smaller losses in e-commerce

The company has invested heavily in e-commerce, which can be accessed by
in-store pickup or through delivery benefits under a subscription program
intended to rival Amazon’s Prime membership.

Global e-commerce sales grew 21 percent. Executives said the business is
still not profitable, but is moving closer towards positive earnings as it
works to reduce delivery costs.

While Walmart has made clear its long-term commitment to e-commerce, the
company in April pulled the plug on Walmart Health, which had operated 51
health centers in five US states.

“We determined there is not a sustainable business model for us to
continue,” Walmart said on April 30 of the venture, which included health
services in rural communities.

Walmart maintained many of its full-year projections, but said sales and
operating income were on track to be at the high end or slightly above the
original forecast.

The company expects full-year sales to rise between three and four percent.
Neil Saunders, managing director of Global Data, praised Walmart’s “strong”
results, pointing to data showing the company has gained more shoppers among
consumers earning over 100,000 dollars over the last three years, as compared with
those in other income categories.

“While most higher income shoppers are satisfied with Walmart, the chain
still has opportunities to deepen its relationship with them,” said Saunders,
pointing to the affordably priced, premium bettergoods food label as a
promising new product line.(AFP)