Published - February 22, 2023 @ 11:26 AM (EET)

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As low-income shoppers gravitated to discounted food and other essentials but continued to pay higher prices on many items compared with last year, retailer Walmart (NYSE:WMT) Inc. reported quarterly sales in another blowout quarter on Tuesday.

Walmart posted earnings per share of $1.71 on $164 billion revenue, easily topping estimates of $1.52 per share on sales of $159.8 billion. Meanwhile, fourth-quarter revenue increased by 7.3% as US comparable sales, excluding gas, grew 8.8%.

Last quarter, US e-commerce sales increased 17% from a year earlier compared with Amazon's (NASDAQ:AMZN) overall 2% sales decline over a comparable period. In addition, Walmart's International net sales totaled $27.6 billion, growing a solid 2.1%.

OUTLOOK

With consumers getting squeezed as interest rates climb and savings rates fall, Chief Financial Officer John David Rainey said, "there's still a lot of trepidation and uncertainty with the economic outlook."

Thus, warning that growth would be hard to come by in the coming year, the company provided a muted outlook, opening a potential part for Walmart to exceed expectations as the year continues. The company expects sales to grow no more than 2.5% in its 2024 fiscal year. 

Walmart expects earnings per share between $1.25 and $1.30 for the current quarter, while the company sees sales growing 4.5%-5%. Wall Street analysts were expecting earnings of $1.36 per share.

Moreover, a considerable miss relative to the consensus of $6.50, Walmart projects EPS for the full year to range between $5.90-6.05.

NOW WHAT

As a growing share of Americans feels the bite of inflation, consumers are increasingly shifting towards buying more food and consumables from general merchandise.

Though Rainey expects this shift to continue to drag margins this year, the company said higher-income consumers made up nearly half of the market share gain that Walmart US saw last quarter. At the same time, other initiatives should broaden the pool of higher-margin revenue.

The retailer said its global advertising business gained nearly 30% to $2.7 billion, while Walmart+ membership increased to 12 million in the last quarter, up 4% from the preceding quarter.  

That compares favorably with Amazon's modest 21% growth in its advertising business and Amazon Prime memberships, which CIRP estimates have "essentially stopped growing" in the US.

Following Tuesday's earnings call, Walmart's stock edged 0.5% higher around midday.