Walmart beats sales, raises outlook as higher-income consumers continue to turn to the retail giant
Walmart (WMT) reported another solid quarter as its business proved resilient against discerning consumers and sticky inflation.
In Q2, revenue grew 4.8% to $169.34 billion, compared to the $168.46 billion expected. Adjusted earnings also beat estimates at $0.67 per share, a 9.8% year-over-year increase.
"Each part of the business is growing," CEO Doug McMillon said in the release. "Store and club sales are up, eCommerce is compounding as we layer pickup and even faster growth in delivery as our speed improves."
He added that the retailer's online marketplace, membership model, and ad business (which grew 26% globally) helped to diversify its profits.
US same-store sales are up 4.3%, including a 4.2% increase for its namesake Walmart business, and a 5.2% jump for Sam's Club.
Groceries remain a key business, a major factor behind the higher foot traffic and ticket sizes.
"We know that they're looking for value and their dollars are stretched, they're focusing in on those things that are providing value for them, they're being choiceful when they buy the larger ticket items," CFO John David Rainey told Yahoo Finance.
He added that the difference in costs of groceries and dining out is working in Walmart's favor. In July, the price of groceries jumped 1.1% compared to a year ago, per the latest data from the Bureau of Labor Statistics. Food away from home, aka dining out, is up 4.1% year over year.
In the Walmart US business, the company said it continued to gain share across all income cohorts, including upper-income households, due to its "value convenience proposition."
Groceries account for roughly 60% of Walmart's US sales. This past quarter, it introduced a private-label brand called Bettergoods, which offers healthier, higher-quality products at a $5 price point.
Its private brand penetration grew 30 basis points in the quarter. Rainey said the team is "highly encouraged by customer uptake" of the new brand.
CFRA analyst Arun Sundaram said the retailer is looking to keep the higher-income households it gained by making shoppers think, "Hey! This is not the Walmart from 10-15 years ago."
"Keep in mind that Walmart sells mostly groceries and other household products, and it's taking market share, so what it has been experiencing is going to be a bit different than what other retailers have been experiencing," UBS analyst Michael Lasser told Yahoo Finance.
The company said it still saw "slight inflation" in food categories last quarter and is working with suppliers to lower costs. For general merchandise, McMillon said on the earnings call that low-income shoppers are focused on price points, while higher-income shoppers are beginning to buy more discretionary goods online and willing to pay for convenience with its Walmart+ membership model.
Its international business saw sales grow 7.1% as it ramped up its store count and online business.
Earnings breakdown
Here's what Walmart reported for its fiscal year 2025 second quarter, compared to Wall Street estimates per Bloomberg:
Revenue: $169.34 billion versus $168.46 billion
Adjusted earnings per share: $0.67 versus $0.65
Overall same-store US sales growth: 4.30% versus 3.41%
Walmart US same-store sales growth: 4.20% versus 3.43%
Traffic: 3.6% versus 2.82%
Ticket growth: 0.6% versus 1.27%
E-commerce growth: 3% versus 2.10%
Sam's Club US same-store sales growth: 5.2% versus 3.9%
For its fiscal 2025, Walmart now expects sales to grow between 3.75% and 4.75%, with adjusted earnings per share coming in between $2.35 and $2.43. That's compared to previous guidance of net sales growing on the higher end of 3% to 4%, and adjusted earnings per share in the range of $2.23 to $2.37.
Rainey said back-to-school sales are off to a good start, which is typically a good indicator of how the holiday season will perform.
Shares of Walmart are up 37% so far this year, compared to a 16% gain for the S&P 500 (^GSPC).
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.