Walmart has today raised its annual sales and profit forecast for the second quarter in a row, but cautious comments from executives for the holiday season sent its shares down 7% in premarket trading.
The company said shoppers slowed purchases at the end of October, in contrast to spending patterns earlier in the quarter, echoing comments from other retailers that have seen sales ebb.
"There's just a flag that maybe there's reason to be a little more cautious on the consumer given some of what we've seen," Walmart's chief financial officer John David Rainey told Reuters.
He added higher interest rates and declining household finances are issues of concern.
Walmart's bigger focus on groceries has provided a bulwark against the broad slowdown in discretionary spending.
More than half of the company's merchandise comprises of food, and other daily essentials, while at rival Target, discretionary goods take up a majority of the shelf space.
The US retail giant has used its size and scale to keep prices low despite inflation, drawing in not just low-income shoppers but also more high-income consumers looking for cheaper options to stretch their budgets.
Prices on food and consumables have been "more in check" than the prior year while prices of general merchandise goods like clothing and home goods have fallen between 3-6%, Rainey said.
Inflation overall fell to about 2% in the quarter for the US retailer, which operates more than 5,300 stores in the US.
While shopper visits rose 3.5% in the third quarter, shoppers are "still very choiceful and using discretion" and are waiting for promotional events like Black Friday and Cyber Monday, he said, echoing comments made by Target CEO Brian Cornell earlier this week.
Rainey said he still expected the company to "outperform relative to others in this holiday period."
Walmart shares were down 7% in premarket trading, a day after its stock hit an all-time high of $169.91 following results from rival Target which projected fourth-quarter earnings above estimates.
Walmart's shares are up nearly 20% this year and are relatively more expensive than peers.
Walmart now expects fiscal 2024 earnings per share between $6.40 and $6.48, up from its prior forecast of $6.36 to $6.46.
It sees comparable sales for the full year rising 5% to 5.5%, compared with an increase between 4% and 4.5% estimated previously.
Sales of grocery and health and wellness products drove most of the sales in the third quarter, but Rainey also noted that shoppers bought more apparel and home goods at the chain on Walmart's marketplace.
Apparel sales rose in the mid-teens percentage range while sales of home goods and toys were up between 30%-37%, a trend he said bucks what other retailers have been witnessing.
Comparable sales, or sales at Walmart's US stores open at least a year, rose 4.9% ended October 31, excluding fuel, above estimates of 3.35%. Online sales rose 15%.
The company posted an adjusted profit of $1.53 per share in the third quarter. Analysts on average were expecting $1.52 per share.
