Retailer’s short-term expectations are more conservative
Walmart believes the consumer has suddenly turned unpredictable — a notion that’s leading the retailer to be more cautious when it comes to its short-term strategy, according to Walmart CEO Doug McMillon who spoke during the company’s most recent earnings call Thursday.
Despite solid numbers in the third quarter, Walmart experienced a sluggish end to October before business picked back up in November.
McMillon said grocery prices were on the decline in areas like dairy, chicken, and seafood — a trend which will put more unit pressure on Walmart moving forward. In fact, McMillon said he believes the U.S. may soon experience a period of deflation.
Walmart is also expecting U.S. same store sales to peak next quarter before it starts to drop over the next three quarters.
Walmart also cited another reason for taking a more conservative approach in the coming months — according to the U.S. Commerce Department, Americans pulled back on spending in October after six months of gains.
Analysts had had their eye on recent earnings calls for both Walmart and Target as a means of forecasting how holiday sales will shake out. If that’s the case, Walmart’s cautious approach doesn’t exactly bode well for free-wheeling holiday spending.
Walmart shares fell more than 6% following the third quarter results, which included a 4.9% year-over-year increase in U.S. comparable sales and a 24% increase in U.S. ecommerce transactions.
Sam’s Club comparable sales showed a rise of 3.8% vs. Q3 2022 and memberships were up 7.2%.
Total revenue was $160.8 billion, a 5.2% improvement year-over-year and consolidated operating income increased just over 130% at $3.5 billion.
“We had strong revenue growth across segments for the quarter, and we’re excited to get an early start to the holiday season,” said McMillon. “Looking ahead, our inventory is in good shape, the teams are focused, and our associates are ready to serve the customers and members.”
Stores will be in better shape in the coming months as Walmart announced in late October it will be spending more than $9 billion to upgrade and modernize 1,400 stores nationwide.The new look has already been tested at concept
stores at a few Walmart Supercenters, and Walmart has reported that same-store sales at these “Stores of the Future” are increasing by a few percentage points. One store located in Teterboro, N.J., had same-store sales jump 20%.
“These construction investments allow us to create more local jobs and make it easier for our associates to get customers what they want, when they want it,” Walmart said in a statement.
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