Walmart's sales continue to grow, with full-year performance expectations raised, becoming the top choice for more and more Americans | Financial Report Insights

Walmart's latest quarterly report is out, with more and more consumers choosing to buy daily necessities and search for discounted items at Walmart, driving both the company's revenue and profit to exceed market expectations. At the same time, Walmart has also raised its full-year performance expectations.

On Thursday, May 16, Walmart announced its Q1 performance for the 2025 fiscal year (ending April 26). This quarter, the company's revenue was $161.51 billion, a 6% year-on-year increase, exceeding the market's expected $159.58 billion. This growth was mainly due to an increase in customer transaction frequency, rather than an increase in the average amount per transaction, as more people are shopping at Walmart.

Additionally, due to profit improvements in various segmented markets led by Walmart US, Walmart's consolidated gross margin increased by 42 basis points to 24.1%; the company's adjusted earnings per share were $0.60, higher than analysts' expected $0.53.

Walmart's sales in its old stores in the US (stores open for more than a year) increased by 3.8% year-on-year, exceeding the expected 3.17%. With some easing of inflation, the average spending per customer per shopping trip remained flat, not increasing as expected by 1.32%, but the number of transactions increased by 3.8% compared to the same period last year. Among them, e-commerce performance was particularly outstanding, growing by 22%. Walmart pointed out that high-income households are the main driving force behind its sales growth.

In terms of performance guidance, driven by these positive factors, Walmart has raised its full-year performance expectations and now expects adjusted earnings per share for the full year to reach or slightly exceed the previously expected $2.23 to $2.37, with full-year revenue growth expected to be between 3% and 4%. Analysts had previously expected Walmart's full-year adjusted earnings per share and revenue growth to be close to the high end of the above expectations.

In response, Walmart's CEO Doug McMillon said in a conference call with analysts: "The recent performance growth of the company is not being driven by inflation. Increases in unit sales, transaction volume, and market share are the main factors driving strong performance. The company is rolling out more discount offers, which are resonating with more and more value-seeking customers."

After the quarterly report was released, Walmart's stock price surged by 7.3% at one point during trading, marking the largest increase since the end of 2022, driving the company's stock price to a historic high since its listing. As of Wednesday's close, Walmart's stock price has risen by 14% year-to-date, outperforming the S&P 500 index's 11% increase during the same period

Strong Performance in E-commerce Business

Walmart emphasized its strong performance in the global e-commerce field, stating: "The penetration rate of e-commerce has increased in all global markets, mainly due to the self-pickup and delivery services provided by stores and the promotion of market platforms."

Under economic pressure, consumers tend to purchase necessities rather than luxury goods, affecting the overall dynamics of the retail market. As high-income consumers increasingly rely on delivery services, delivery services are becoming increasingly important for Walmart. The company stated that these consumers prefer to use delivery services, so Walmart is improving its delivery efficiency and quality in various aspects (such as order availability) to attract and retain this consumer group.

Walmart's Chief Financial Officer John David Rainey stated in an interview on Thursday: "We see customers turning to Walmart. These high-income households are the main driving force behind Walmart's market share growth."

Rainey mentioned that Walmart is working to reduce the costs of its e-commerce business while increasing the number of delivery orders, with the growth rate of delivery orders surpassing that of self-pickup orders. In the past 12 months, Walmart has completed approximately 4.4 billion same-day or next-day delivery orders, with about 44% of orders delivered to customers within four hours. In comparison, Amazon stated last month that it achieved over 4 billion same-day or next-day deliveries through its Prime membership service in 2023.

Rainey emphasized that while Walmart was previously known for providing value (affordable prices), the company now not only focuses on value but also emphasizes product quality and shopping convenience. Moreover, as high-income consumers seek deals or look for more cost-effective goods, Walmart benefits from launching more discounts, new products, and decisions to renovate stores. The company stated that it plans to renovate over 900 stores this year.

In contrast, the purchasing patterns of low-income consumers at Walmart show stability, as they mainly purchase food and other necessities rather than general merchandise. At the same time, the purchasing patterns of low-income consumers at Walmart are similar to those of high-income consumers, as their spending on groceries and other necessities exceeds that on general merchandise. Rainey pointed out: "Consumers' wallets are still tight," noting that customers are allocating more of their wages to necessities such as food and beauty products, while reducing spending on higher-margin general merchandise.

High-income consumers under economic pressure are also starting to seek discounts. Currently, consumers are more inclined to purchase basic life necessities (such as food and household items) rather than optional bulk goods (such as furniture and electronics). This change in consumer behavior has negatively impacted other retailers such as Home Depot and Target Corp., as their sales largely depend on non-essential consumption.

Meanwhile, Walmart's grocery business continues to drive company growth, while its general merchandise business lags behind. In the retail industry, groceries are typically considered essential needs and can maintain relatively stable sales even during economic slowdowns Recent reports show that due to concerns about inflation and the job market, consumer sentiment fell to a six-month low in early May. This negative sentiment may impact consumer purchasing decisions, leading to stagnant retail sales in April.

However, a potential inflation indicator in April cooled down for the first time in months, which is a positive sign for Federal Reserve officials hoping to start lowering interest rates this year.

Senior executives at Walmart anticipate that in the near future, food and other consumer goods prices will experience single-digit inflation, while prices of general merchandise will see mid-single-digit deflation. This means that prices of necessities like food may slightly rise, but prices of non-essential items like clothing and appliances may decrease.

Walmart executives also noted that they see an opportunity to increase general merchandise sales through their online marketplace. The online marketplace allows third-party sellers to sell products on Walmart's platform, which not only expands product variety but also boosts Walmart's website traffic and sales.

Evercore analyst Greg Melich wrote in a report on Thursday that the uncertain consumption patterns of middle and low-income American consumers remain a challenge. He mentioned, "Given the ongoing market anxiety among Walmart's core consumer base, the stock appears likely to benefit from today's results and steady guidance, providing some relief to the market." Walmart continues to meet the needs of consumers at different income levels through its wide product range and pricing advantages, while actively adapting to market changes to maintain its leading position in the retail industry