Walmart beats earnings expectations as cost-conscious shoppers seek deals

Walmart reported earnings and revenue that beat expectations as shoppers hit by sticky inflation flocked to the discount chain to start their holiday shopping.

In the three months ended Oct. 31, Walmart reported adjusted earnings per a share of 58 cents, above expectations of 53 cents. The company had revenue of $169.6 billion, above expectations of $167.7 billion and up from $160.8 billion in the same period a year earlier.

The company said it now expects net sales to grow between 4.8% and 5.1% this year due to increased demand for discount goods, up from a previous forecast of between 3.75% and 4.75%.

Walmart shares rose 4.9% Tuesday morning.

Non-convenience aisle sales rose year-over-year for the second consecutive quarter after 11 straight quarters of decline as customers continue to seek out bargains, says CFO John David Rainey told CNBC.

“We expect this holiday period to be very consistent with that,” he said. “They are focused on price and value.”

The buoyant earnings report comes as reports show signs of easing inflation and gas prices have started to fall — but Americans remain frustrated by high prices.

Walmart has emerged as something of a stand-alone in the retail industry as it has grown its share of the market, “primarily from higher-income households.” Households earning more than $100,000 annually accounted for 75% of Walmart’s gains, according to CNN.

The trend is a sign that households of all income levels are searching for discounts and deals as they grapple with sticker shock on everyday items — and Walmart is reaping the benefits. Walmart stock is up 66.1% so far this year.

President-elect Donald Trump’s pledge to impose tariffs on imports from China and other countries has fueled fears that his policies could reignite inflation. During his presidential campaign, Trump said he would impose a 10% to 20% on all imports, including a 60% to 100% tariff on goods from China.

Rainey warned that the charges could force the discount chain to raise its prices, even though it relies on its “low everyday prices” to win customers.

“We never want to raise prices,” Rainey said. “But there will likely be cases where prices will increase for consumers.”

About two-thirds of the products Walmart sells are made in the United States, he said.

“We’ve lived under a tariff environment for seven years, so we’re pretty familiar with it,” Rainey told CNBC. “However, tariffs are inflationary for customers, so we want to work with suppliers and with our own private brand range to try and bring prices down.”

Trump’s transition team did not immediately respond to requests for comment.

Meanwhile, a boost in discretionary spending and home deliveries helped Walmart’s third-quarter earnings.

Same-store Walmart sales rose 5.3%, and same-store Sam’s Club sales rose 7%.

Visits to Walmart stores and its website—and the amount spent per visits – increased in the third quarter. US transactions rose 3.1% and the average ticket increase rose 2.1% from last year.

E-commerce sales rose 22% in the U.S. as more customers used Walmart’s home delivery and curbside pickup options.

Rainey said Walmart’s e-commerce division is “getting very close to profitability” as more customers pay extra fees for faster deliveries within a one-hour or three-hour time frame.

Holiday spending is expected to tick up this year, although not as much as usual. Holiday spending in November and December is likely to rise 2.5% to 3.5% to between $979.5 billion and $989 billion, according to the National Retail Federation. This growth falls short of last year’s 3.9% jump, which totaled spending of $955.6 billion.

But Rainey said the holiday season “is well underway” at Walmart.

Big ticket items like televisions, Apple AirPods, Beats headphones and even car tires have flown off the shelves. Meanwhile, sales of warmer clothing and space heaters have disappointed as some parts of the country experience unseasonably warm weather.