Retail giants Walmart (NYSE:WMT) and Target (NYSE:TGT) announced their quarterly results last week. On Thursday, Walmart reported fiscal third-quarter earnings that surpassed Wall Street's expectations, with a rise in sales. However, the retail giant expressed a cautious outlook as it observed a decline in consumer spending towards the end of the period.
The company's stock fell by over 8% on Thursday, following a record high the previous day. With the crucial holiday shopping season ahead, Walmart provided a year-end forecast slightly below expectations.
Walmart now predicts its adjusted earnings per share for the year to be between $6.40 and $6.48, slightly lower than the $6.48 anticipated by analysts but still an improvement over its earlier projections. The company also expects a 5% to 5.5% increase in consolidated net sales, an upward revision from its previous estimate.
The trend of inflation easing, and even deflation in some categories, could benefit Walmart's customers but potentially impact the company's sales. CEO Doug McMillon noted on the earnings call that while prices for some grocery items remain high, they have decreased for dairy, eggs, chicken, and seafood. He also mentioned that customers could expect price relief when shopping for holiday gifts.
The continuing drop in general merchandise prices may signal a shift for Walmart. The company has seen sales increases partly because customers have been paying more for various items during the inflationary period.
How did Walmart perform in Q3?
Walmart's financial results for the quarter ending October 31 surpassed analyst expectations based on consensus estimates from LSEG. Here's a breakdown of their reported figures versus what was anticipated:
Adjusted Earnings Per Share: $1.53, slightly above the expected $1.52.
Revenue: $160.80 billion, exceeding the forecast of $159.72 billion.
In this fiscal third quarter, Walmart experienced a notable increase in net income, recording $453 million, or 17 cents per share. This is a significant turnaround from the previous year's quarter, where they faced a loss of $1.8 billion, or 66 cents per share, mainly due to a settlement related to opioid litigation.
The company's revenue, up from $152.81 billion in the same quarter last year, was bolstered by its robust grocery segment, which has performed well amidst high inflation and a rise in digital sales.
Walmart U.S. saw a 4.9% increase in comparable sales, a key retail indicator also known as same-store sales. Additionally, Sam’s Club reported a year-over-year rise of 3.8% in its comparable sales.
Target exceeds analyst estimates
On Wednesday, Target reported quarterly results that surpassed Wall Street's sales forecasts and significantly exceeded earnings expectations, thanks to strong sales in frequent purchase categories like food and beauty, which offset softer overall customer spending.
For the fiscal third quarter ending October 28, here's how Target's performance measured up against Wall Street's expectations, based on LSEG's analyst survey:
- Earnings per share: $2.10 vs. $1.48 expected
- Revenue: $25.4 billion vs. $25.24 billion expected
Following the announcement, Target's shares closed nearly 18% higher, reflecting a recovery from the stock's decline earlier this year.
However, the retail giant continues to face persistent challenges. Consumers are primarily focusing on essential purchases, are increasingly price-conscious, and are delaying purchases, such as waiting for colder weather before buying items like jeans or sweatshirts, as explained by CEO Brian Cornell in a media call.
Target saw a decline in comparable sales for the second consecutive quarter. This key retail indicator, also known as same-store sales, adjusts for the effects of store openings, closures, and renovations.
Michael Fiddelke, Target's Chief Financial Officer, emphasized on the call that the company is intently working on boosting customer traffic and sales into positive figures.
Despite this focus, Target's leadership team indicated a turnaround might not occur this year, even with the expected influx of holiday shoppers.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.
