Walmart’s 6% increase in its fourth quarter revenue demonstrates that consumers continue to feel positive about the economy and its outlook as purchases are made more often.
The nationwide retailer reported on Tuesday that the number of transactions increased by 4.3% as consumers made more frequent purchases, including items such as food. But consumers have been cautious in their spending, even during the past holiday season. Walmart reported that the average price spent by customers fell by 0.3%.
Walmart has a large grocery in its stores and lower prices on food items helped boost the retailer’s sales.
“In food, prices are lower than a year ago in places like eggs, apples and deli snacks, but higher in other places like asparagus and blackberries,” CEO Doug McMillon said during an earnings call.
The retailer has stocked its shelves with more items from private label brands compared to two years ago since it focuses on shoppers looking for a bargain.
Consumers are buying fewer appliances, luggage and furniture to name a few items as compared to the 2020-21 period when demand for goods rose, Art Hogan, managing director and chief market strategist at B. Riley Financial, told Cheddar.
“The consumer is doing fine,” he said. “Walmart is telling us the consumers are buying things they need because they already bought everything they want. No one is buying big ticket items.”
Recent consumer confidence surveys such as the Conference Board’s January results showed that people feel better about 2024 as inflation has declined and with the expectation that the Federal Reserve will lower interest rates.
“Consumers are being modest with their spending as consumer confidence remains high,” Hogan said. “It’s good news. They can buy what they need and are not splurging. Household budgets look good, too.”
Walmart CFO John David Rainey told CNBC that its customers are buying fewer items each time they shop, but are making more trips to the retailer. TVs, computers, electronics and other pricier items have not been flying off the shelves, he said.
Consumers are still feeling the impact of higher inflation rates over the past few years as wage growth has not caught up, Thomas Hayes, chairman of Great Hill Capital in New York, told Cheddar.
“Inflation is impacting discretionary spending at the lower end as wages play catch up with inflation,” he said.
Even though inflation rates have decreased, they are still higher than before the pandemic.
“Inflation is a tax on the poorest segment of the population,” Hayes said. “Their downshift in discretionary spending and focus on paying for essentials tells us that their wages have not caught up despite inflation moving in the right direction. It will take time.”
Online sales at Walmart rose by 17% in the U.S. and its global sales increased by 23%, the retailer said.
Walmart also announced on Tuesday that it would purchase Vizio, a smart TV manufacturer, for $2.3 billion. The acquisition would boost the retailer’s advertising business since Vizio sells ads via its TVs.
But don’t worry, you can still buy any type of TV in any Walmart or Sam’s Club, a membership-only warehouse retailer.
The retailer reported net income declining to $5.49 billion or $2.03 per share in the three-month period that ended Jan. 31, compared with $6.28 billion or $2.32 per share a year ago during the same period.
The company expects consolidated net revenue to increase 4% to 5% during its fiscal first quarter and expects adjusted earnings of $1.48 to $1.56 per share on a pre-stock split basis.
For its fiscal 2025, Walmart estimates its consolidated net sales will rise by 3% to 4% and adjusted earnings will be $6.70 to $7.12 per share on a pre-stock split basis.
In January, Walmart said the retailer plans a major expansion plan by opening or enlarging over 150 stores over the next five years throughout the U.S. The company had previously said it would upgrade over 1,400 stores in an attempt to modernize them.
Shares of Walmart were trading at $170.75 midday on Tuesday, an increase of 8.8% during the past month.
