Walmart (WMT) shares are rising after the company reported its second-quarter results, beating expectations on both revenue and earnings. The retail giant raised its full-year revenue and earnings forecast after noting strong demand for consumer goods.
Walmart CFO John David Rainey joins Yahoo Finance Editor-in-Chief Brian Sozzi on the Morning Brief to provide insights into the company’s latest earnings report, his views on the consumer landscape and more.
Overall, Rainey says, despite the uncertainty surrounding the election and geopolitical events, consumers have remained resilient and are “hanging in there.” He also notes that they are focusing more on essentials and less on nonessentials.
Rainey comments on what he sees about consumers based on Walmart’s data: “We know they value what they buy and that their money is tight, so they focus on the things that give them value. They choose the more expensive items carefully.”
Rainey also commented on the international part of the business and the growth he has seen there: “What has changed there, and what I think is different than maybe a decade ago, is that we are really happy with our presence. We have focused our strategy. All of our markets are contributing to that growth. We are heavily focused on China, we are heavily focused on India. Those areas of our business tend to be faster and grow more on e-commerce.”
Rainey argues that the results show that Walmart “is able to do well in tougher times, perhaps even in times of recession. We also do very well in times of expansion.”
Watch the video above to hear what Rainey says about higher-income consumers shopping at the retail giant.
Click here to watch the full episode of Morning Brief for more expert insights and information on current market events.
This article was written by Nicolas Jacobino
Video transcript
OK, let’s take a look at Walmart, as shares are moving higher after the retailer raised its full-year sales forecast, citing price-conscious consumers. The forecast is improving again as investors digest a mixed picture of the U.S. economy and the U.S. consumer ahead of the highly anticipated first Fed rate cut this fall.
We’d like to bring in John David Rainey, he’s the CFO of Walmart, and we’re also bringing in Editor-in-Chief Brian Zazie.
Nice to see you both, Jon David.
Congratulations on another strong quarter for Walmart.
I’m curious that you raised your full-year estimates here.
What does that tell us about the trends you’re seeing with the consumer and the fact that the consumer may not be as weak as initially feared? For us, it’s a financial quarter of performance: we achieved 5% revenue and our operating profit grew at an accelerated rate of 7.5%.
And what is important: We have raised our forecast for the year.
We have observed consistency among consumers.
If we look at the individual months of the second quarter, the results are all quite consistent.
There was no decline in July, as some had expected, and that is broadly our forecast for the year.
With the upcoming elections in the US, there is certainly reason to be cautious about the outlook.
There is unrest abroad.
But the consumer is still holding out.
They are picky and demanding.
They look for value and focus on the things that are necessary rather than the unnecessary things.
And I think the most important thing is that they value convenience, and we can offer that to them better today than ever before.
John David.
Nice to see you as always.
Joining us in the studio about 30 minutes later is Chili’s CEO Kevin Hockman.
Now they had a revenue quarter with an overwhelming majority.
I mean, sales at Chili’s are up 15%.
I mean, this is crazy.
Uh, and I’m looking at your Walmart results in the US, which are very, very strong.
Do you think that consumer in the United States is one that is bracing for a recession? It’s hard to say, Brian. I look at the same economic data that you do and I can say that from within our own four walls and digital walls, including this one.
Um, we know they’re looking for value and their budget is still tight.
And that’s why they focus on the things that add value to them.
They are picky about the more expensive items, and if you look at the economic data, there is also a small difference between the cost of food at home and eating out.
This is certainly one of our strengths and we would like to continue to offer our customers this added value.
I wrote some hot takeaways.
Um, John David, after reading your report, an international company has turned things around.
Walmart continues to gain market share from Target. Their e-commerce momentum in the US is huge, so keep it that way. Keep an eye on Walmart US membership revenue.
But do you think that investors are missing out on your international activities?
I mean, this is the second consecutive quarter of double-digit growth in operating profit, which is a rebound in this business.
And what does this mean for your PNL for 2025?
You’re right, Brian, I think International is one of the, um, better stories at Walmart, and it probably doesn’t get proper credit.
We tend to have a very US-focused investor base and they focus on US business.
But as we noted when we met with the investment community last year, International will contribute more to revenue and bottom-line improvement over the next five years than the rest of the company.
What’s changed there, and what I think has changed compared to maybe a decade ago, is that we’re really happy with our footprint.
We have focused our strategy; all our markets contribute to this growth.
The focus is strongly on China.
The focus is strongly on India.
These tend to be faster-growing, more e-commerce-focused parts of our business, but the rest of the portfolio is also performing well.
Walmart, Walmex and Mexico are doing very well and uh, and, and see, it all contributes to the overall company, but it is uh, it is a fast growing and profitable part of our portfolio.
When John David speaks to international conversations and even here in the United States about the risk of geopolitical unrest internationally, he brings the issue of the U.S. elections back here to the United States as well.
Does this pose a risk to Walmart’s business and to what extent?
Well, I think consumer confidence obviously has some impact on private consumption.
So yes, there is a risk.
What you need to know about our business and what we are showing with these results, in my opinion, is that we are a company that is able to perform well even in more difficult times, perhaps even in times of recession.
We are also doing very well and are also experiencing more expansive times.
And that’s because our business has changed.
Walmart is simply different today than it was a decade ago.
We offer convenience to our customers.
And you see that in our e-commerce growth. Brian mentioned the growth in e-commerce, it’s up 21% in the quarter.
And if you look at all the factors that contributed to our year-over-year profit increase, the core business is e-commerce, so just the core business, excluding advertising memberships.
Among all other areas that tend to deliver higher margins, core e-commerce was the single largest contributor to the improvement in our operating profit in the quarter.
Yes.
And in that context, uh, John David, you noted that the earnings release included Walmart membership fees.
We are now investors who have been following your company for decades.
This is not a line.
I think a lot of people are used to seeing how big the member income is at Walmart.
Imagine this was Walmart Plus.
And can we assume that you are simply taking market share away from Amazon Prime?
Well, um, we try to provide value to all of our customers.
One way for them to experience this added value is through membership, where they can take out a monthly or annual subscription and then have the items delivered.
And we see that customers who are Walmart Plus members shop with us about three times more often than the average customer.
If you take into account membership and advertising for these two components alone, it now accounts for about 20% over 20% of our operating income.
So big contributors, but it’s exactly what we want to offer our customers, or rather we see that the frequency of visits comes from them.
John David when it comes to purchasing school supplies.
What trends do you see so far?
And, and, and, and also, you mentioned a trend in the last few quarters when you were with us, namely the higher income consumer.
The fact that they may start to trade down or just trade down a little bit.
Is this something you see all the time?
Well, we don’t like to call it “trading down.”
I would rather say that we trade with Walmart.
Um, we offer a lot of things that are valuable to them, but back to school is off to a good start.
We’re just getting started. Customers have told us they’re about halfway through their school or college purchases.
And so we still have to wait and see what happens here.
But their stationery category is one example that is off to a very good start and tends to be a leading indicator of how the rest of the holiday shopping season will unfold.
So as we look back at the second half of the year, we’re excited and we found ourselves raising our guidance, um, you know, after outperforming in the first half of the year.
That’s not to say there’s no reason to be cautious about the outlook given some of the things you mentioned earlier, but we’re running our business and it’s going well.
We are gaining market share and customers, and our value proposition is resonating with them.
John David, I didn’t tell Sean this, but I’m looking for a new, uh, bright red Transformers backpack for back to school.
I mean, now that I have the money to buy these things, I don’t have to rely on my parents anymore. I could actually buy a few of them by just filling my whole house with them.
I mean, I, I’ll wear them.
It’s ok.
Everything is fine.
We do a lot of back to school shopping at Walmart, I can tell you that.
All right, John David Rainy.
It’s always nice to have you with us.
Thank you for taking the time to join us here at Yahoo Finance this morning.
We appreciate that.
And of course my thanks go to Brian Zazi.
