Walmart grows more optimistic about 2024 as bargains prove a powerful lure for the inflation weary

NEW YORK -- Walmart had another quarter of strong sales that topped almost all expectations with its comparatively low prices proving a powerful draw for millions who have struggled with rising costs for housing, groceries and almost everything else.

The nation’s largest retailer raised its full-year outlook and executives said their customers may still be holding out for deals, but they're not seeing any signs that they're fraying.

“So far, we aren’t experiencing a weaker consumer overall,” CEO Doug McMillon told industry analysts Thursday.

Evidence of a resilient U.S. consumer is apparent across the entire retail sector.

The U.S. reported Thursday that Americans stepped up their retail spending last month in the largest leap in a year and a half. At least on Thursday, that helped ease concerns that a sustained campaign by the U.S. Federal Reserve to cool spending with higher interest rates may have gone to far and damaged the main driver of the U.S. economy, the consumer.

Walmart is among the first major U.S. retailers to report quarterly results and provides a peek into how Americans are feeling about their spending power, which came into question recently after hiring by U.S. employers fell surprisingly hard in July and the unemployment rate rose for the fourth straight month. The strong U.S. economy has been a main driver of global economic growth and the U.S. jobs market has given Americans the financial wherewithal to keep spending.

Yet the July hiring data that shook markets has been repeatedly offset by broader economic trends pointing to a steadily improving environment for both consumers and retailers.

The Labor Department said Wednesday that year-over-year inflation last month reached its lowest level in more than three years, another hint that the worst price spikes in four decades are fading and setting up the Federal Reserve for an interest rate cut in September. That doesn't mean prices overall are falling, but wages and the cost of living appear to be coming more inline after the pandemic skewed the economy.

Walmart Inc. reported earnings of $4.5 billion, or 56 cents per share, in the three months ended July 31. That compares with $7.9 billion, or 97 cents per share, in the same period last year when it booked big investment gains. Adjusted per share earnings were 67 cents, or 2 cents better than Wall Street had expected, according to FactSet.

Sales rose nearly 4.8% to reach $169.33 billion, also beating expectations.

Comparable store sales — which include online and stores open for the past 12 months — rose 4.2% in the U.S. That compares with 3.8% in the first quarter, and 4%, in the fourth quarter

Global e-commerce sales rose 21%, matching the first quarter's pace.

The number of transactions and the average amount customers spent during each of those transactions at Walmart was higher in this quarter than it was during the same three months last year.

And in a potentially encouraging shift, Walmart said sales of discretionary items like clothing were flat to very slightly positive. Americans for two years have maintained a laser-like focus on the essentials, taking a pass on goods that are not absolutely necessary, and spending that money instead on groceries and other basics.

John David Rainey, Walmart's chief financial officer, told The Associated Press in a phone interview that the improvement was a result of several factors: deflationary prices in general merchandise, which helped attract more shoppers, and improved offerings on the shelf from Walmart. Rainey cautioned that shoppers are still choosy and they're gravitating more toward store label goods and waiting for sales.

In July, Walmart launched its biggest store-label food brand in 20 years in terms of the breadth of items, hoping to reach younger customers who are not loyal to grocery brands and are seeking to cut their grocery bills. Walmart said it expects to have a total of 300 products under the Bettergoods label by the fall, ranging from frozen foods to coffee and chocolate.

Grocery prices, however, have remained stubbornly high, Rainey said.

Walmart has stepped up discounts and during the most recent quarter it had 7,200 price rollbacks, a 35% increase.

For back-to-school, Walmart retooled its 30-year-old brand called No Boundaries. to cater to Gen Z customers. The retooling of the No Boundaries label is part of a strategy to get customers to think of Walmart as a place to buy cool clothes, along with groceries.

For the year, Walmart said it now expects earnings per share to be in the range of $2.35 to $2.43. That's up from its previous estimate of $2.23 per share to $2.37 per share. Analysts projected $2.44 per share, according to FactSet.

The retailer is projecting annual sales to be up anywhere from 3.75% to 4.75%. It had previously expected sales would rise 3% to 4%.

Shares of Walmart Inc., based in Bentonville, Arkansas, jumped 7% Thursday.