Retail giant Walmart reported higher profits Thursday on strong profits at its U.S. stores, pointing to increased purchases by wealthy shoppers and improved e-commerce sales.
In the quarter that ended April 30, sales rose 6% to $161.5 billion, and profits more than tripled to $5.1 billion. Earnings for 2023 were hit by exceptional losses in equity investments.
Earnings that exceeded analysts' expectations pushed up the stock price, which rose 6.3% in morning trading.
Company executives said on a conference call that the increase in sales to affluent shoppers reflects a focus on affordability and convenience, as well as an increased focus on products such as fresh produce. .
“We're not chasing high-income sales, we're just providing value,” CEO Doug McMillon said.
The company divides its shoppers into three income groups. Annual income less than $50,000, annual income less than $50,000, between $50,000 and $100,000. Each accounts for about a third of the customer base, or more than $100,000, according to Chief Financial Officer John David Rainey.
“The word we use here is convenience,” Rainey said. “We are no longer just a game of value.”
But Rainey noted that many consumers remain strapped for cash as inflation lingers and prices generally rise compared to the pre-pandemic economy.
“Many consumers' pockets remain tight,” Rainey said. “The impact of this on our business is that they are spending more of their paychecks on non-discretionary categories and less on general merchandise.”
～Less losses in electronic commerce～
The company has invested heavily in e-commerce, available through in-store pickup and delivery benefits under a subscription program aimed at rivaling Amazon's Prime membership.
Global e-commerce sales increased 21%. Executives said the business is not yet profitable, but is working to reduce shipping costs and is moving toward profitability.
While Walmart has made clear its long-term commitment to e-commerce, in April it exited Walmart Health, which operated 51 health centers in five U.S. states.
Walmart said on April 30 that the business, which includes medical services in rural areas, “has determined that there is no sustainable business model for us to continue.”
Walmart maintained many of its full-year forecasts, but said it expects sales and operating profit to be at or slightly above initial expectations.
The company expects full-year sales to increase 3-4%.
Neil Saunders, managing director at Global Data, praised Walmart's “strong” performance, saying that Walmart had the highest ranking among consumers with incomes of $100,000 or more in the past three years, compared to other income categories. He cited data that shows the company has acquired more shoppers than consumers.
“While most high-income shoppers are satisfied with Walmart, the chain still has an opportunity to deepen its relationship with them,” Sanders said, adding that the chain has expanded its “Better Goods'' affordable premium food label. It was cited as a promising new product line.
