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Walmart’s profits are fueled by high-income shoppers

Walmart’s profits are fueled by high-income shoppers

Walmart said comparable store sales in the United States rose 3.8 percent compared to the prior-year quarter. E-commerce business in the United States jumped by 22 percent.

Walmart has performed better than retailers that rely on apparel sales, in part because it also sells staples like groceries. Consumers, especially those with low incomes, are looking for places to save after a period of high inflation.

Transactions rose by 3.8%, while the average ticket price showed that with each visit people were spending roughly the same amount as they did this time last year. Walmart’s quarterly profit was $5.1 billion, triple the previous year’s profits.

Walmart stock rose more than 6% in morning trading, as investors reacted to the results and the company’s improved outlook for growth this year.

Consumers from “higher-income households” helped gain market share, the retailer said, repeating a trend it has observed since Americans began to weather high inflation two years ago.

In an interview, John David Rennie, Walmart’s chief financial officer, noted the company’s focus on making shopping more convenient through features like curbside pickup and delivery, as well as diversifying its product offerings, especially online.

“You think about things like AirPods and MacBook Air, which are definitely items that appeal to a higher-income demographic,” Mr. Rennie said. “The more we move into this area and offer a wider selection like this, the more I think we will maintain this group.”

Over the past three years, households earning more than $100,000 have had the biggest gains in Walmart’s market share, according to Neil Saunders of Global Data, an analytics and consulting firm.

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“In a sea of ​​challenging, volatile and confusing consumer spending, what is interesting is how strong and consistent this quarter and many of the past few quarters have been for Walmart,” said David Silverman, a retail analyst at Fitch Ratings.

Walmart makes decisions about where to invest.

As grocery stores continue to bring people into stores, they have introduced a special line called Better goods, which offers more upscale cuisine such as vegetarian and gluten-free options. New products like these could help Walmart hold on to the younger, wealthier customers it gained during the peak of inflation.

Walmart’s profits were also helped by growth in its advertising business, which grew 24 percent last quarter. The company acquired smart TV company Vizio this year A deal worth $2.3 billion. Walmart sees the purchase as a way to increase sales by connecting advertisers with potential shoppers.

Walmart also said it will expand its subscription platform that gives suppliers and merchants real-time visibility into product performance. The Walmart Luminate platform will become available in Mexico and Canada this year.

The business, which doubled in the last quarter, helps suppliers ensure their products are “relevant to the customers that Walmart has today,” Mark Hardy, who helps oversee the platform, said in an interview.

Not all companies lived up to the company’s hopes. Last month, Walmart said it would close its 51 health care centers in five states. She said the initiative, which began in 2019, had proven unprofitable.

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Walmart said this week it was cutting several hundred roles at the company, without providing details. It has paid to bring employees back to offices and will move employees in its technology division to its headquarters in Bentonville, Arkansas, to the San Francisco Bay Area or to the New York area.