Walmart lifts sales outlook ahead of festive season as shoppers stock up

Walmart, the world’s biggest retailer, on Tuesday raised its annual sales and profit forecast in anticipation of a surge in demand for toys and apparel during the crucial holiday season, even as global supply chain disruptions hit its margins in the third quarter.

Major retailers including Amazon.com have been struggling to bring products into the US ahead of the peak shopping season due to shipping logjams, shuttered factories in parts of Asia and a scarcity of raw materials in recent months.

However, Walmart kept prices low to draw shoppers to its stores, and limited disruption from supply chain shortages by chartering its own vessels to ship goods, ordering products into the US well ahead of time and rerouting deliveries to less crowded ports.

This helped Walmart increase US inventory by 11.5% ahead of the busy festive season, with executives saying the measures taken to tackle port delays have positioned Walmart well for the holidays.

“We have the people, the products, and the prices to deliver a great holiday season for our customers and members,” CEO Doug McMillon said. Walmart said that it had hired more than 200,000 new store and supply chain workers to tackle the holiday rush.

With more than 5,000 US stores, the discounter’s size and leverage with consumer product companies allow it to sell goods at lower prices, a key advantage when US inflation is at a 30-year high.

“The long period of sustained demand for goods has stretched supply chains, resulting in out of stocks and inflation,” McMillon said. “Fighting inflation is in our DNA.”

Walmart’s forecast comes weeks after rival e-commerce giant Amazon reported an underwhelming fourth-quarter outlook and warned of higher costs during the holiday period.

The Bentonville, Arkansas-based company also said it expects full-year US same-store sales to be more than 6% higher vs its prior forecast of a 5% to 6% rise. Adjusted profit is expected to be about $6.40 per share up from a previous range of $6.20 to $6.35.

In the third quarter, sales at US stores open at least a year rose 9.2%, excluding fuel, benefiting from higher grocery demand and people buying more at stores. Analysts had estimated a gain of 7.04%, according to Refinitiv data.

“We gained market share in grocery in the US, and more customers and members are returning to our stores and clubs around the world,” McMillon said.

Home Depot also posted stronger-than-expected results in the third quarter, a sign that increased  spending on home improvement continues as the pandemic wanes. Comparable-store sales  increased 6.1% in the period, according to a statement released on Tuesday.

Walmart and other retailers are aggressively chasing consumer brands’ ad dollars, touting the wealth of their shopper data and prime media space on their websites and in stores.

Some analysts also warned of a margin hit during the festive season, with Evercore’s Greg Melich saying that supply chain issues or inflation could see Walmart down 10-30 basis points on its fourth quarter gross margin rate in the US.

Shares of the world’s largest retailer were down about 2%.

Total revenue grew by a better-than-expected 4.3% to $140.53bn and on an adjusted basis it earned $1.45 per share, 5c above Wall Street expectations.

Reuters