Walmart (WMT) reported its fiscal 2023 fourth-quarter results that topped Wall Street estimates.

Q4 revenue for Walmart came in at $164.05 billion, an increase of 7.3% year-over-year, while adjusted earnings per share came in at $1.71 — both higher than Wall Street estimates. Net sales also increased 7.4% to $162.7 billion for the quarter as mid-and higher-income consumers look to the retail giant for value in an inflationary environment.

Shares of the Bentonville, Arkansas–based retailer fell, down more than 2%, at market open, after its updated fiscal 2024 outlook for its U.S. businesses came in lower than analysts' expectations. However, shares quickly regained losses.

Walmart continues to gain among higher-income consumers

Net sales for Walmart U.S. came in 8.0% higher year-over-year, of $113.7 billion for Q4 fiscal year 2023. The company noted that it saw "continued strong market share gains in grocery, including high-income households."

U.S. same-store sales for the quarter increased 8.3%, excluding fuel, for the 13-week period that ended on January 27, 2023. Overall, sales were boosted by strength in food categories, private brand sales and higher ticket and store transactions. Transactions increased 1.8% and the average ticket also was higher, up 6.3%.

December 2022 saw the largest sales volume in the retailer's history. Compared to two years ago, same-store sales increased 13.9%. Meanwhile, operating income increased only 3.8% to $5.4 billion due to a decline in gross profit rate partially offset by operating expense leverage, in addition to lower sustainability income. However, benefits from membership income growth, up 7%, offset that.

At its subsidiary brand, Sam's Club, the company saw overall same-store sales for the grocery and beverage category in the high-teens led by strength from dry groceries, drinks, and snacks.

CEO Doug McMillon emphasized this gain of higher-income shoppers in a call with investors. "We're gaining share across income cohorts, including at the higher end which made up nearly half of the gains we saw in the U.S. again this quarter and we're also capturing a greater share of wallet at Sam's Club in the U.S. with both mid- and higher-income shoppers."

McMillon hopes to be able to retain higher-income customers once inflation cools. "Our goal is for the experience they're having in our stores and clubs combined with our current capabilities for pickup, delivery and membership to result in them choosing us even as inflation eventually subsides."

Consumers are shifting from discretionary spending to focus on food as grocery prices remain higher year-over-year, up 11.3%.

Walmart executives emphasized that grocery inflation remains "stubborn," making it "hard to call" what this category will look like in the back half of the year. As such, the company aims to keep it's outlook cautious.

"As we plan this new fiscal year, we've anticipated stubborn inflation in dry grocery and consumables in particular, which will have some mixed impact," McMillion said, adding, "We'll stay focused on general merchandise and earn sales in those categories to offset that impact as much as possible."

McMillon emphasized that there are a lot of uncertainties regarding a potential recession and that he wants to provide optimal value to keep customers, no matter the environment.

"When we think about our business today compared to what it was during prior economic downturns, we now have a more compelling offer, a true omni-channel experience that makes us optimistic that more higher income families will continue shopping with us across categories because we have pickup, delivery and membership."

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Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].

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