Walmart, the nation’s largest retailer, continues to grapple with the effects inflation is having on shoppers’ habits, saying in its earnings report on Tuesday that its U.S. comparable sales were up 6.5 percent from last year for the quarter ending July 31.
The boost was driven by shoppers buying necessities like groceries. The company’s overall operating income for the quarter was $6.9 billion, a drop of 6.8 percent from the same time last year.
Walmart had prepared Wall Street for the report when it revised its full-year outlook last month, saying it expected profits for the full year to fall by as much as 13 percent. It also said it expected comparable sales to be up about 6 percent for the second quarter, which it was then able to beat slightly.
The retailer on Tuesday said it expected its U.S. comparable sales to increase about 3 percent in the second half of the year. On profit, Walmart provided a rosier outlook, saying it expected operating income to decline 9 to 11 percent. The company’s stock rose more than 3 percent in premarket trading.
The company’s earnings show how difficult it has been for even the most sophisticated retailers to navigate the changes in consumer behavior in recent months. Retailers are adjusting to shoppers’ concerns around inflation and are navigating higher-than-usual inventory levels for items that people are less willing to purchase as they watch the cost of food and gas rise. Consumers have felt some relief recently, with gas prices in the U.S. falling below $4 a gallon last week — their lowest level since March.
More of Walmart’s sales are coming from its grocery unit, a sign that shoppers are continuing to concentrate their spending on essential items like food — which often have lower profit margins — while curtailing spending on categories that they deem more discretionary.
Walmart is trying other ways to attract customers. On Monday, the retailer announced that it had reached an agreement to include the Paramount+ streaming service as part of its Walmart+ membership package. Subscribers to Walmart+ pay $12.95 a month for perks that include free shipping and discounts on gas. The retailer had also had discussions with executives from Disney and Comcast about a potential deal that would bundle access to streaming entertainment in with its membership service.
Home Depot, which also reported on Tuesday, surpassed Wall Street expectations for sales and profits in its latest quarter, too. During the pandemic, the home-improvement retailer has consistently outperformed analysts’ projections. But the company’s stock fell in premarket trading, with a decline in the number of second-quarter transactions combined with a significant rise in the average ticket order suggesting that some shoppers may be pulling back while professionals like contractors and builders continue spending.