Walmart expects smaller drop in annual profit, announces US$20b share buyback

WALMART on Tuesday (Nov 15) forecast a smaller fall in annual profit as demand for groceries holds up despite higher prices, while discounts on clothing and electronics attract more inflation-hit shoppers to the top US retailer’s stores.

The company also raised its full-year net sales expectations and announced a new US$20 billion share buyback plan, pushing its shares up 5 per cent in premarket trading.

Sales of food and other essentials that fill much of Walmart’s shelf space have proved resilient, even as shoppers cut back on discretionary spending amid decades-high inflation.

The company’s heavy discounting and focus on keeping prices lower than rivals have also helped it take market share from smaller players.

However, those moves have hit the company’s gross profit margins, which tumbled 89 basis points in the third quarter ended Oct 31.

The company said it expects fiscal 2023 adjusted earnings per share to fall 6 per cent to 7 per cent, compared to its previous forecast of a 9 per cent to 11 per cent decline.

Walmart said it expects fiscal 2023 net sales to increase 5.5 per cent, compared to its previous forecast of a 4.5 per cent increase.

Total third-quarter revenue rose 8.7 per cent to US$152.81 billion, beating analysts’ estimates of US$147.75 billion, according to Refinitiv IBES data.

Walmart enters the holiday quarter with inventories valued at nearly US$65 billion, up from about US$60 billion three months ago.

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However, Walmart forecast holiday quarter US same-store sales, excluding fuel, to increase about 3 per cent, below estimates of a 3.4 per cent increase. Fourth-quarter adjusted earnings per share are expected to decline 3 per cent to 5 per cent, compared to analysts’ estimates of a 4.5 per cent fall.

FedEx and Amazon have warned of a slump in holiday season demand in recent weeks. REUTERS