(Reuters) -Walmart on Tuesday raised its annual sales and profit forecast for the third consecutive time, as people bought more groceries and merchandise, a sign the world's largest retailer continues to gain market share ahead of the holidays.
Shares of Walmart, which are up nearly 60% this year, rose as much as 4.5% to a record high of $87.88 in early trading.
The retailer is among the first major U.S. chains to provide insight into the all-important holiday quarter and how consumers are planning to spend as inflation ebbs.
"In the U.S., in-store volumes grew, pickup from store grew faster, and delivery from store grew even faster than that," Walmart CEO Doug McMillon said.
Though inflation has not made much headway in recent months, it is on a downward trend, raising purchasing power. Walmart said it saw share gains across income cohorts mainly led by upper-income households, which make more than $100,000 in annual income.
The retail bellwether now forecast fiscal 2025 consolidated net sales to rise in the range of 4.8% to 5.1%, compared with prior expectations of 3.75% to 4.75% growth.
It also expects annual adjusted profit per share to be between $2.42 and $2.47, compared with its previous forecast of $2.35 and $2.43.
"Walmart continues to take share as they benefit both from an environment that suits their value proposition, but are also taking advantage of a host of internal improvement drivers that are showing up," D.A. Davidson analyst Michael Baker said.
Retailers including Walmart, Amazon.com and Target kicked off the holiday shopping season earlier than usual, offering deals on everything from toys to household items.
Walmart and Target stocked more private-label brands and upped their grocery offerings as consumers seek to purchase essentials and gifts at the lowest price possible.
"The majority of our customers are maintaining their holiday plans year over year amidst the election, the calendar shift, the economic backdrop," Walmart said.
Republican Donald Trump's victory in the 2024 U.S. presidential election could weigh on some shoppers, said Minkyung Kim, Assistant Professor of Marketing at Carnegie Mellon University's Tepper School of Business.
Trump's tariffs on imports, if implemented in 2025, could raise prices on clothing, toys, furniture, appliances, footwear, and travel goods, particularly affecting items where China is a major supplier, according to the National Retail Federation, a U.S. trade group of which Walmart's U.S. head is the chair.
"We're concerned that significantly increased tariffs could lead to increased costs for our customers at a time when they are still feeling the remnants of inflation," a Walmart spokesperson said.
"We never want to raise prices ... We will work with government officials and our suppliers to minimize the impact on our customers."
ONLINE BUMP
The company has invested billions in expanding its e-commerce business by providing more product choices online and built up automation in its supply chain to help stock fresher produce and improve delivery times as consumers increasingly prefer the convenience of purchasing groceries online.
In the third-quarter, U.S. e-commerce sales jumped 22%, mainly led by store-fulfilled pickup and delivery, as well as growth in its marketplace and advertising businesses.
Walmart's global e-commerce business had surpassed $100 billion in sales in 2023, and CFO John David Rainey said in June he expects its U.S. e-commerce business to turn a first profit in the next year or two.
To broaden the appeal of its delivery service, Walmart slashed the annual fee for its Walmart Plus membership by 50% ahead of the holiday season. The retailer is offering U.S. shoppers a one-year membership for $49 through Dec. 2.
Walmart Plus members receive unlimited free same-day deliveries from stores on orders over $35.
"The growth in ecommerce is an indicator of where the customer is headed, and Walmart Plus is a great way for customers to amortize the cost of delivery over time," the CFO Rainey said on a post-earnings call.
MORE PURCHASING POWER
In the third quarter ended Oct. 31, Walmart's U.S. comparable sales rose 5.3%, beating analysts estimates of a 3.61% increase, according to data compiled by LSEG. It saw sales growth across categories including the general merchandise segment that had suffered declines for over two years due to sticky inflation. The segment saw a boost from sales of toys and home goods.
Walmart also posted comparable sales growth in its health and wellness category, helped by strong demand for GLP-1 or weight-loss drugs.
"U.S. customers remain resilient with behaviors largely consistent over the past four to six quarters," CFO said.
Walmart's focus on household and grocery products had insulated it against a slowdown in spending on non-essentials, helping the company post better-than-expected quarterly results in the first half of the year.
As purchasing power increases, analysts expect upper and middle income consumers to mainly drive the shift back in spending on non-essential or nice-to-have merchandise.
"I do think Walmart has been capturing a more affluent consumer. I think the Walmart Plus membership has helped drive that and the company continues to reflect good strength in their online business and their pick up and delivery," Telsey Advisory Group analyst Joseph Feldman said.
The retailer reported quarterly adjusted profit of 58 cents per share. Analysts were expecting 53 cents per share.
(Reporting by Ananya Mariam Rajesh and Aishwarya Venugopal; Additional reporting by Juveria Tabassum in BengaluruEditing by Vanessa O'Connell and Nick Zieminski)
