Walmart forecasts smaller profit decline this year as rebates boost demand – National

Walmart Inc. on Tuesday raised its annual earnings guidance, partially reversing a sharp cut less than a month ago, as rebates to eliminate excess merchandise and lower fuel prices helped beat expectations for quarterly sales.

The stock, which is down more than eight percent this year, is up four percent in premarket trading. Shares of rivals Target Corp., Costco and Best Buy also rose on the news, while futures on the blue-chip Dow index pared losses.

Walmart said it now expects adjusted earnings per share to fall 9% to 11% in fiscal 2023.

Last month, the top US retailer spooked markets around the world when it forecast a drop of 11% to 13% – down from a previous forecast of a 1% drop – and warned consumers to keep their discretionary shopping in far withdrawing at a faster pace are feared as rising inflation is affecting their purchasing power.

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That forced Walmart to slash prices on items like apparel to try to reduce the more than $61 billion worth of inventory it was sitting on at the end of the first quarter.

A number of other retailers, including Target Corp and Best Buy Co Inc., have also issued profit warnings in recent weeks as they struggle with excess merchandise.

Walmart reported inventory of $59.92 billion at the end of the second quarter ended July 31, still up 25 percent year-on-year.

“I think it’s going to take another quarter, maybe getting a little bit into the fourth quarter, to get back to where we want to be from a total inventory perspective,” said John David Rainey, Walmart’s chief financial officer.

Walmart’s total sales rose 8.4 percent to $152.86 billion in the second quarter, helped by demand for groceries and other essential items. According to Refinitiv IBES data, analysts had estimated sales at $150.81 billion.

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Since the last round of quarterly earnings, consumer prices for goods and services have shown signs of easing. The consumer price index rose 8.5 percent in July, down from the previous month, mainly due to a 17 percent drop in gasoline prices.

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Sales at Walmart’s US stores open for at least a year rose 6.5 percent, partly due to higher prices and slowing fuel inflation, beating a previous forecast of a 6 percent increase.

However, discounts on discretionary products, slowing demand for high-margin items such as appliances, electronics and clothing, and rising labor costs caused the company’s quarterly operating profit to fall 6.8 percent to $6.85 billion.

The Bentonville, Arkansas-based retailer now expects consolidated net sales growth of about 5 percent and a 9-11 percent decline in adjusted earnings in the third quarter. Same-store sales for Walmart US, excluding fuel, are expected to increase three percent, the company said.

Home Depot Inc. also reported strong quarterly sales for the second quarter on Tuesday, helped by steady demand for home improvement items from home builders and do-it-yourselfers. Walmart forecasts smaller profit decline this year as rebates boost demand – National


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