Walmart raises full-year profit, revenue guidance amid retail earnings season

The Yahoo Finance Live team discusses the rise of Walmart stock as earnings beat estimates, the company's full-year profit, revenue guidance, and consumer trends.

Video Transcript

SEANA SMITH: One of the outperformers today, consumer discretionary and consumer discretionary, communication services, but consumer discretionary a big story there, Akiko, on the heels of the earnings report that we just got out from Walmart this morning.

AKIKO FUJITA: Yeah, and we are watching shares there. We saw a big pop for the company, with the retail giant reporting better than expected earnings ahead of the open. And it did raise its guidance. You see the stock up more than 1% there. Strength in the grocery business helped offset weakness in clothing and electronics. And like its peers, Walmart says it's seeing signs of a consumer slowdown. Here's what Walmart CFO John Rainey told Yahoo Finance earlier today.

JOHN DAVID RAINEY: When consumers are coming to our stores, we're seeing tradedowns in terms of buying less expensive meats, or instead of buying a pack of 12, they're buying a pack of six. You can see that their wallets are being stretched more thinly. And when you look broadly, I look at the same economic data that you do, but there are other indicators. We're seeing credit as a funding instrument, as an example, be more elevated to where it was in prior periods. You're seeing delinquency rates on credit cards, in general, tick up. And so there are these signs that there's some fraying in terms of the consumer health. And we're keeping a cautious outlook on that.

AKIKO FUJITA: Walmart CFO John Rainey there talking to our morning team about what that consumer looks like for Walmart. Seana, when you look at the numbers here, strong quarter for Walmart. When you compare it to some of the other retailers, comparable store sales were up more than 7% year on year. I think it's interesting to note what they're seeing in the consumer, though, because it's a little different than what we heard from some of the other retailers.

Number one, they talked about how they're seeing sort of the higher income consumer coming in, particularly for groceries. Sort of a tradedown, you could argue, because of the discounted prices that Walmart has to offer. Also, private brand penetration up 110 basis points. So going for some of these private brands, instead of the other brands that we see, that is another sign of a tradedown. Overall, that you could argue when you think about the consumer, concerns around inflation, Walmart's a little better positioned, largely because of the mix that they offer with more groceries than some of these other retailers.

SEANA SMITH: Yeah, the grocery results there, Akiko, definitely helping padding these recent results and really showing why Walmart is better positioned in this type of environment. You mentioned the fact that some of those higher income shoppers, more of those people are shopping now at Walmart. And that's something that executives have discussed in recent earnings reports, what they also discussed this morning. And now they want to make it a reason for those higher income shoppers to continue shopping at Walmart. That's one of the challenges that the company has, as we look out to the next couple of quarters just in terms of retaining that new shopper.

When you take into account some of the other strong numbers that the company put up, improvement in inventory something that we certainly saw at Target yesterday. Also, inventory levels at Walmart falling about 7% on a year over year basis. And online sales, Akiko, that was up across the board in all the divisions. Overall, up 27%, and you compare that to Target, which actually saw its online sales fall about 3% in the most recent quarter.

AKIKO FUJITA: Yeah, and that's really the result of several years of significant investments for Walmart in trying to expand that online presence. One more thing I should note, though, because we've been talking so much about some of these retail names, the mix of what Walmart is seeing among shoppers, a little similar to what we've heard from the likes of Target. They've said grocery health and wellness are the big drivers right now. Some of those other discretionary items we've seen consumers holding off on, at least so far.