Walmart raises full-year sales, profit forecasts as holidays start strong

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(Businesshala) – Walmart Inc 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 dented its earnings in the third quarter. Margins affected.

FILE PHOTO: Shoppers wearing masks are seen while shopping at a Walmart store in Bradford, Pennsylvania, US, July 20, 2020. Businesshala / Brendan McDermid / File photo

Shares of the world’s largest retailer were flat in pre-market trading, reversing an earlier 2% gain.

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Major retailers, including Amazon.com, have been struggling to bring products to the United States ahead of the peak shopping season in recent months due to closed factories in parts of Asia and a shortage of raw materials.

Walmart, which has been renting its ships to carry goods, said US inventory was up 11.5% ahead of the busy festive season.

“We have the people, products and prices to deliver a wonderful holiday season for our customers and members,” Chief Executive Officer Doug McMillan said in a statement.

Some analysts expect Walmart and its rivals to have enough inventory this holiday season because of shipments that have been delayed for months at US ports.

“All of a sudden you have three months of product coming out,” said Marshall Cohen, chief retail analyst at NPD.

“What could once be a shortage of product may very well turn into a surplus now.”

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

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

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

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

The increased pedestrian traffic comes at a time when inflation is high, and deep discounts like Walmart are trying to attract cash-strapped Americans to stores.

“Prolonged periods of sustained demand for goods have stretched up the supply chain, resulting in depleted stocks and inflation,” McMillan said. “Fighting inflation is in our DNA.”

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

The company’s third quarter gross profit rate declined 42 basis points. Total revenue rose 4.3% to $140.53 billion, better-than-expected and earned $1.45 per share, 5 cents higher than Wall Street’s expectations on an adjusted basis.

Reporting by Aishwarya Venugopal in Bengaluru and Richa Naidu in Chicago; Editing by Arun Koyur, Kirsten Donovan

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