Walmart Inc. has revised its annual U.S. same-store sales forecast upwards after exceeding analysts’ expectations. The positive sales performance can be attributed to the effects of the COVID-19 pandemic as shoppers gradually resume their normal activities and purchase more items such as clothing, travel gear, and back-to-school supplies.

While the in-store sales figures have shown growth, Walmart’s online growth has experienced a significant slowdown. The company’s online sales growth dropped from 37% in the first quarter to 6%. However, Walmart is still on track to reach its target of $75 billion in global e-commerce sales by the end of the year. It is worth mentioning that Walmart witnessed an impressive surge in online sales of 97% last year, as consumers heavily relied on its efficient delivery services during the peak of the pandemic.

Despite the e-commerce growth slowdown, Walmart CEO Doug McMillon remains optimistic about the company’s ability to effectively serve customers regardless of their preferred shopping method.

These encouraging results mark the beginning of an important earnings week for major U.S. retailers, including Target and Macy’s. These companies are expected to benefit from increased foot traffic as consumers become more active this summer. However, there are concerns among investors regarding the rising COVID-19 cases, particularly due to the highly contagious Delta variant, which could potentially disrupt the newfound freedom and impact retail sales.

In the second quarter that ended on July 31, Walmart’s U.S. stores achieved a 5.2% growth in sales compared to the previous year, excluding fuel. This surpassed the estimated growth rate of 3.69% predicted by analysts. The boost in sales can be attributed to the stimulus checks distributed during the pandemic and the recent advance child tax credits provided by the Biden Administration.

In light of these positive results, Walmart now anticipates a 5% to 6% increase in fiscal 2022 U.S. same-store sales, as compared to its previous forecast of low single-digit growth. Additionally, the company expects sales in the current quarter to surpass expectations. However, this outlook is dependent on the assumption of ongoing strength in the U.S. economy and no significant additional government stimulus for the remainder of the year.

According to Moody’s retail analyst Charlie O’Shea, the increased guidance for the third quarter reflects Walmart’s ability to maintain strong performance, heavily relying on its physical stores. The company’s U.S. gross margin also witnessed improvement by 20 basis points, primarily due to fewer discounts and a significant increase in U.S. ad sales. These factors helped offset the higher supply chain costs.

In terms of financial performance, Walmart reported adjusted earnings per share of $1.78, surpassing analysts’ expectations of $1.57 per share. Total revenue also increased by 2.4% to $141.05 billion, exceeding the estimated figure of $137.17 billion.

These strong financial results and raised forecasts demonstrate Walmart’s resilience and ability to adapt to changing market conditions. With its physical stores continuing to play a pivotal role in its success, Walmart remains optimistic about its future growth prospects.

Useful links:
1. CNBC: Walmart Q2 2022 Earnings Beat Sales Rise as Pandemic Eases
2. Reuters: Walmart lifts annual US same-store sales forecast above prior range