Walmart stock moves lower as upbeat sales are offset by cautious guidance


Shoppers are still flocking to Walmart, but America’s largest retailer is sounding caution about the future amid an uncertain macroeconomic backdrop.

Walmart posted a revenue of $160.8 billion for its third quarter earnings results on Thursday morning. Total revenue is up 5.2% compared to last year, and higher than expectations of $159.13 billion. Its US same store sales grew 4.7%, higher than the expected 3.35%.

Adjusted earnings per share came in a cent higher than estimates at $1.53 versus $1.52.

Foot traffic grew 3.40%, more than the 1.50% expected. Ticket size is up 1.5%, lower than the expected 2.08%.

Despite the earnings beat, Walmart gave soft guidance for the rest of the year. It raised its full year EPS to $6.40 to $6.48, higher than its previous guidance of $6.36 to $6.46, but lower than the expected $6.48.

Shares fell 6% in premarket trading after the report.

“Recently, we’ve experienced a higher degree of variability and weekly performance in between holiday events in the U.S., including seeing a softening in the back half of October that was off trend to the rest of the quarter,” said CFO John Rainey in a call with investors.

Uneven sales numbers give the retailer reasons to be more cautious about the state of consumer, Rainey added. Walmart expects sales growth to moderate in Q4 as inflation in grocery prices slows down, but “we’re encouraged by the increased traffic and share gains we’ve seen and expect,” said Rainey.

A few factors that drove sales growth include e-commerce, grocery and pharmacy sales.

E-commerce sales in the US jumped 24%, boosted by increasing pickup and delivery orders.

Its grocery department continues to perform as US consumers look for value, with their wallets pinched by headwinds like higher interest rates, ongoing inflation, among others.

The category grow mid-single digits as consumers bought more food — including its private label options —as well as more personal care products and pet supplies.

Its health and wellness unit, saw sales jump in the high-teens from increases in “script counts, higher mix of branded versus generic prescriptions, strength in immunizations, and branded drug inflation,” according to Walmart’s release.

General merchandise saw low-single digit growth due to fewer people buying discretionary items like apparel, home decor and toys.

In the US inventory declined 5%, an issue that got a lot of attention last year when retailers had too much in stock.

Rival Target (TGT) has seen a slowdown in consumer spending, but not as badly as Wall Street had expected when it reported its earnings results on Wednesday.

Walmart Store of the Future: Customer shopping (Courtesy: Walmart)

Walmart Store of the Future: Customer shopping (Courtesy: Walmart)

“I think what’s encouraging is that our traffic, our transaction counts remained strong and consistent throughout the quarter,” said Walmart CEO Doug McMillon, who pointed to unusual weather in late October as a potential reason for the shift in spending.

Walmart recently announced a $9 billion store improvement initiative in the US.

In Q3, its operating expenses as part of net sales increased by 35 basis points. Last quarter the company remodeled 233 stores, with 494 remodeled year-to-date.

The company has also announced significant wage changes this year. The company said “higher wage-related costs” and legal expenses weighed on its operating expenses.

This story is breaking and being updated.

Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].

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