Walmart sees increase in discretionary spending, increase in delivery

Walmart on Tuesday raised its outlook for the year after benefiting from increased spending on non-essential items and a rise in pickup and delivery orders.

The company — the largest U.S. retailer and a key indicator of U.S. consumer satisfaction — forecasts net sales growth of between 4.8% and 5.1%, up from its previous forecast of 3.75% to 4.75% sales growth.

It also continues to get a significant boost from higher incomes.

“We had a strong quarter that continued our momentum,” Walmart CEO Doug McMillon said in the company’s earnings release. “In the US, in-store volumes grew, in-store pickup grew faster, and in-store delivery grew even faster than that.”

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The company reported that its third-quarter revenue rose more than 5% from the previous quarter to $169.6 billion, beating Wall Street’s estimate of $167.72 billion. The adjusted earnings per stock also beat Wall Street estimates by 5 cents.

A North Miami Beach, Florida, Walmart customer using a self-checkout register. (Jeffrey Greenberg/Universal Images Group via Getty Images/Getty Images)

In the three-month period ended Oct. 31, sales at U.S. stores rose 5.3% due to “strength across product categories and physical and digital channels,” Walmart reported.

The increase in discretionary spending marks a reversal of the trend seen in recent years, when inflation squeezed household budgets and forced many shoppers to focus on essential items.

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Walmart launches pharmacy delivery across several states. (Walmart)

For the prior three-month period, U.S. transactions grew 3.1% and the average ticket increased 2.1% year over year, according to Walmart. The company said it is also gaining more customers, primarily from higher-income households.

E-commerce sales increased 22% in the US, driven in part by in-store pickup and delivery.

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Telsey Advisory Group Senior Managing Director Joe Feldman predicted earlier this month that during the holiday season, consumers “will likely remain robust and selective with how they spend, including a gradual shift back toward a discretionary product.”

However, the National Retail Federation (NRF), the largest retail trade group in the United States, reported modest growth in holiday shopping.

The NRF forecast that total spending throughout November and December will grow between 2.5% and 3.5% during 2023 to between $979.5 billion and $989 billion.