WalMart’s Earnings Report Said More Than You Might Think

Jason Simpkins

Updated May 20, 2024

WalMart’s earnings report came out Thursday and it told us a lot about both the economy and the country’s largest retailer.

It wasn’t all good, either. It was just good for WalMart

Broadly speaking, it looks like consumers are shook. That’s bad news for the economy at large, but it’s exactly the environment in which WalMart thrives. 

Remember, this is a company that got where it is by ruthlessly undercutting its competition. It’s mastered supply chain and inventory logistics. And it uses economies of scale to keep prices obscenely low. 

WalMart’s size, name recognition, and broad appeal soak up foot traffic. And more recently, it’s developed an online presence that’s siphoned higher-end shoppers away from posher chains. 

Indeed, it seems like people who wouldn’t otherwise be caught dead walking the aisles of WalMart are content to order its products online — especially when it comes to groceries. 

So let’s take a closer look at WalMart’s earnings report and I’ll tell you what it means for all of us…

WalMart Earnings 1Q 2024

What’s Behind WalMart’s Earnings Report

First, here’s a breakdown of WalMart’s earnings report…

First quarter revenue climbed 1.2% to $161.51 billion from $159.58 billion a year ago. Adjusted earnings per share jumped 13% year-over-year to $0.60. And same-store sales growth came in at 3.9% compared to 3.42% in 2023.

All of those figures exceeded expectations. But what’s key is that neither higher prices nor bigger ticket items drove that increase. Traffic did. 

That is, ticket growth was virtually flat at 1.32%, which means people weren’t necessarily buying more expensive goods. However, traffic surged 3.8%, compared to 3.45% in the same period last year. 

That implies more people are looking for bargains. And that tracks with the recent data we’ve seen. 

Notably, the University of Michigan Survey of Consumers sentiment index for May posted an initial reading of 67.4 for the month, down from 77.2 in April and well below the Dow Jones forecast of 76. 

That’s a one-month decline of 12.7%, which is significant. It suggests consumers just don’t feel good about the economy right now. 

There’s further evidence of that in sluggish retail sales. Indeed, retail sales for the month of April were flat — literally 0.0%, according to the Commerce Department. And March’s reading was revised down slightly to 0.6%. 

Retail sales excluding automobiles, gasoline, building materials and food services fell 0.3% last month after a downwardly revised 1% increase in March. 

April 24 Retail Sales

We also have more anecdotal evidence from other major retailers like McDonalds and Home Depot — both of which reported disappointing first-quarter results and griped about consumers steering clear of their stores.

Home Depot’s same-store sales fell 2.8% in the first three months of the year. And McDonalds fell short of expectations in what it called “a challenging consumer environment.” (McDonalds also just unveiled a new $5 value menu in an effort to win back diners who no longer view the restaurant as cheap.) 

All of this makes WalMart’s first quarter success all the more impressive. And together, the data paints a picture of an American consumer that’s holding back, if not tapped out.

It’s no surprise then that WalMart’s bulk retail chain Sam’s Club saw a 4.4% increase in same store sales for the quarter, up from 3.3% a year ago.

However, what really saved WalMart’s bacon was groceries, which now account for more than half the retailer’s revenue. That’s highlighted by the fact that merchandise sales actually declined for the quarter, while grocery sales increased.

Again, we see consumers cutting back, but as a grocer of first-resort for many, WalMart excelled.

Additionally, WalMart also made apparent inroads with higher-end customers — those that make more than $100,000 a year. It’s these customers WalMart credited for the strong growth of its online sales.

To that point, WalMart’s digital sales surged 22% in the first quarter, and in-store pickup sales jumped 50%.

“Delivery has been a key source of share gains among upper-income households and is also the most productive channel for acquiring Walmart+ members,” WalMart CFO John David Rainey noted on the company’s earnings call.

There are two explanations for that. The first is that even wealthier shoppers are feeling cash strapped. And the second is that people with more money are willing to pay delivery fees of $7.95 – $9.95 or the $12.95 monthly cost of a WalMart+ subscription. 

In any case, it’s all clicking for WalMart right now. The company’s earnings beat has carried the stock to a record high. And it’s a strong bet as WalMart is positioned to thrive in any environment — but especially one in which consumers are cutting back and focusing on food.

It’s also telling that ahead of WalMart’s earnings, the company reportedly laid off hundreds of employees and called on scores of its corporate staff to return to its on-site office locations. 

The company also announced it was shuttering Walmart Health — an initiative started in 2019 that offered in-person health clinics at 51 stores as well as virtual visits.

These kinds of cost-cutting efforts could just be routine trimming — or they might say something bigger about WalMart’s outlook on the economy.

Fight on,

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Jason Simpkins

Simpkins is the founder and editor of Secret Stock Files, an investment service that focuses on companies with assets — tangible resources and products that can hold and appreciate in value. He covers mining companies, energy companies, defense contractors, dividend payers, commodities, staples, legacies and more…

In 2023 he joined The Wealth Advisory team as a defense market analyst where he reviews and recommends new military and government opportunities that come across his radar, especially those that spin-off healthy, growing income streams. For more on Jason, check out his editor’s page.

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