Inflation Hit Hard, Walmart in the US Performed Well

Q2 Earnings Announcement
Strong Performance Despite Inflation Pressure

US retail giant Walmart succeeded in defending against inflation and posted better-than-expected strong results for the second quarter.

On the 17th (local time), the largest US retailer Walmart announced in its earnings report that its second-quarter sales this year reached $161.63 billion, a 5.7% increase compared to the same period last year ($152.9 billion). This exceeded the market expectation of $160.27 billion. Adjusted earnings per share also rose 4.0% from $1.77 in the same period last year to $1.84, surpassing the market estimate of $1.71.

Sales increased in its core food business, and inventory, which had been a concern, decreased, showing overall solid performance. The increase in food business sales is interpreted as a result of consumers dining out less due to high prices and a higher proportion of customers visiting Walmart. John David Rainey, Walmart’s Chief Financial Officer (CFO), explained in an interview with US economic media CNBC, "Due to the impact of inflation, demand for cooking at home instead of dining out has increased, leading to higher sales of ready-to-eat foods and cooking utensils."

In particular, sales in the food sector of Walmart’s relatively low-priced private brand (PB) products grew 9% compared to the same period last year. PB business sales account for 20% of total sales.

US economic media CNBC evaluated, "Walmart is relatively insulated from the negative effects of inflation due to its unique characteristics as a channel with lower prices than other retailers like Target and a high proportion of grocery sales." It explained that essential consumer goods such as groceries tend to see unavoidable spending increases even when prices rise, which is advantageous for defending earnings.

[Image source=EPA Yonhap News]

Not only offline but also online performance was strong, with online sales increasing 24% year-over-year during this period, supported by high sales in the e-commerce sector.

After the earnings announcement, Walmart stated in a conference call that consumers’ wallet conditions have improved compared to the beginning of the year, backed by lower unemployment rates and strong wage growth, and assessed that "inflation is easing." This contrasts with the earlier statement by the US Federal Reserve (Fed) that it sees significant upward pressure on inflation.

According to the minutes of the Federal Open Market Committee (FOMC) July meeting released the day before, most members stated that the fight against inflation is not over yet and additional interest rate hikes may be necessary.

Meanwhile, Walmart expressed confidence by raising its second-half earnings guidance. The company raised its full-year earnings per share target from $6.36 to $6.46 and increased its full-year sales growth forecast by 0.5 percentage points to 4.5%.

This content was produced with the assistance of AI translation services.