Walmart profits rise on strong sales from wealthier shoppers

New York – Walmart reported higher profits Thursday behind solid gains at US stores as the retail giant pointed to increased purchases by wealthier shoppers and improving e-commerce sales.

Profits more than tripled to $5.1 billion for the quarter ending April 30 on a six percent rise in revenues to $161.5 billion. Earnings in the 2023 period were dented by exceptional losses in equity investments.

The results, which topped analyst estimates, lifted shares, which rose 6.3 percent in morning trading.

The improved sales to wealthier shoppers reflect a focus on affordable pricing and convenience, as well as a greater attention to products such as fresh food, company executives said on a conference call.

“We are not trying to chase higher-income cohort sales, we just offer value,” said Chief Executive Doug McMillon.

The company splits shoppers into three income groups: below $50,000 in annual income; between $50,000 and $100,000; and above $100,000, with each comprising about a third of the customer base, said Chief Financial Officer John David Rainey.

“The word we’ve been using here is convenience,” Rainey said. “We are not just a play for value anymore.”

But Rainey noted that many consumers are still strapped for cash due to inflation, which has lingered and resulted in generally higher prices compared with the pre-pandemic economy.

“Many consumer pocketbooks are still stretched,” Rainey said. “We see the effect of this in our business is that they’re spending more of their paychecks on non-discretionary categories and less on general merchandise.”

– Smaller losses in e-commerce –

The company has invested heavily in e-commerce, which can be accessed by in-store pickup or through delivery benefits under a subscription program intended to rival Amazon’s Prime membership.

Global e-commerce sales grew 21 percent. Executives said the business is still not profitable, but is moving closer towards positive earnings as it works to reduce delivery costs.

While Walmart has made clear its long-term commitment to e-commerce, the company in April pulled the plug on Walmart Health, which had operated 51 health centers in five US states.

“We determined there is not a sustainable business model for us to continue,” Walmart said on April 30 of the venture, which included health services in rural communities.  

Walmart maintained many of its full-year projections, but said sales and operating income were on track to be at the high end or slightly above the original forecast.

The company expects full-year sales to rise between three and four percent.

Neil Saunders, managing director of Global Data, praised Walmart’s “strong” results, pointing to data showing the company has gained more shoppers among consumers earning over $100,000 over the last three years, as compared with those in other income categories.

“While most higher income shoppers are satisfied with Walmart, the chain still has opportunities to deepen its relationship with them,” said Saunders, pointing to the affordably priced, premium bettergoods food label as a promising new product line.