Major retailers were surprised at the start of the year when Americans spent more on travel and recreation after the Pandemic. Retailers are trying to figure out how to get rid of all their excess inventory as a recession looms.
According to Walmart's most recent earnings report, the nation's largest retailer is doing well despite the uneasy conditions. It may be cause for renewed hope in the US economy.
Walmart's revenue rose 8.4% in the second quarter despite fears that the Pandemic and inflation would hurt sales.
Walmart CEO Doug McMillon said in a statement that they were pleased to see more customers choosing Walmart during the inflationary period. Despite sales growth, the company has successfully reduced its inventory levels by using markdowns.
During the earnings call on Tuesday, McMillon explained the increase in sales. He said that the return to pre-pandemic norm was difficult to predict. The inflationary pressure on the consumer has made these trends worse.
The excess inventory peaked during the first quarter.
Walmart, Target, and Amazon all saw their shares fall after their first-quarter profits failed to meet investor expectations.
The earnings report from Walmart was better than expected. According to a research note published Tuesday by Bank of America, Walmart's latest quarterly earnings per share of $1.77 is much higher than its forecast of $1.50.
The company expects adjusted earnings per share to go down.
Walmart's second-quarter sales strength came from spending by wealthier families, according to the company's CEO. He said that people are focused on price regardless of income. The more this lasts, the more that will happen.
The Bureau of Labor Statistics reported last week that there was no net price growth in July, with inflation falling to 8.5% after hitting a high of 9.1% in June.
Tuesday's report shows that inflation isn't stopping consumers from spending According to a report on the company by Bank of America, consumers are more focused on essentials like food than electronics and clothes.
The Bureau of Economic Analysis reported last month that personal consumer expenditures had increased in June, up from the previous month. Consumer spending makes up nearly two-thirds of the U.S. GDP.
McMillon wrote in the report that they made good progress in improving costs in their supply chain. The continued strength in our international markets is a result of our strategy to expand our digital businesses.
Walmart may have reflected a broader improvement in the U.S. economy in the second quarter. It could be something different to Walmart. According to a report by Bank of America, Walmart has performed better than the S&P 500 over the last five recessions and food retailers have historically performed well during high inflation.
If you sign up for the email list, you will be kept up to date with our biggest features, exclusive interviews, and investigations.
All Rights Reserved © 2024
