Walmart Earnings Top Forecast With Grocery Sales Driving Gains; Stock Jumps

Updated at 7:23 am EDT

Walmart  (WMT) - Get Free Report posted stronger-than-expected first quarter earnings Thursday, and lifted its full-year profit forecast, as the world's biggest retailer continues it shift towards higher-margin goods while serving value-focused customers in a competitive grocery market.  

Walmart said adjusted earnings for the three months ended in April came in at $1.47 per share, up 13% from the year-earlier period and well ahead of the Wall Street consensus forecast of $1.31 per share. Group revenues, Walmart said, were up 7.6% to $152.3 billion, again topping analysts' estimates of a $148.75 billion tally. U.S. same-store sales were up 7.4%, the retailer said, well ahead of the Street's 5.25% forecast. 

Operating income improved 17.3% to $6.24 billion, Walmart said, with operating margins up 34 basis points, reflecting the retailer's shift in focus from scale to profitability. Gross margins slipped 18 basis points to 23.7% amid the rise in lower-margin grocery sales.

Looking into the current quarter, which ends in July, Walmart expects adjusted earnings of between $1.63 and $1.68 per share. For the full year, sales will likely rise 3.5% from 2022 levels, with Walmart forecasting earnings of between $6.10 and $6.20 per share, a 15 cent improvement from the upper end of its prior forecast.

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"We had a strong quarter. Comp sales were strong globally with eCommerce up 26%. We leveraged expenses, expanded operating margin, and grew profit ahead of sales," said CEO Doug McMillon. "And a big thankyou to our associates, who continue to step up and deliver for customers and members whenever and however they want to be served."

Walmart shares were marked 1.45% higher in pre-market trading immediately following the earnings release to indicate an opening bell price of $151.70 each.

Earlier this week, both Target  (TGT) - Get Free Report and Home Depot  (HD) - Get Free Report posted better-than-expected first quarter earnings that were clouded by muted near-term outlooks linked to fading consumer demand.

Target said it sees a low-single-digit percentage decline in same-store sales for the current quarter, but held to its full-year forecast for adjusted earnings of between $7.75 and $7.85 per share.

"As we look beyond Q2, we continue to believe that we entered this year with the appropriate level of caution, planning conservatively in light of a tough macro environment and rapidly changing consumer trends," said CFO Michael Fiddelke.

Home Depot, however, cut its 2024 fiscal year profit forecast, saying overall earnings will decline between 7% and 13% from 2023 levels, compared to its prior forecast of a 'mid single digit' decline, with comparable sales down between 2% and 5%.