- On Tuesday, Walmart reported stronger sales and profits than expected in the three months to July and forecast a smaller decline in full-year earnings than it had warned investors before.
- Home Depot, the DIY chain, reported its highest quarterly sales and earnings on record, saying that consumers were spending on home improvement despite high inflation and mortgage rates, with its business accelerating in recent weeks.
For some time, record inventories at some of America’s largest big box retailers, was raising concerns that the U.S. may already be in a recession, at a time when lower demand was meeting overstocked warehouses, a relic from pandemic overbuying.
Two profit warnings from Walmart (+5.11%), the world’s largest retailer, since May have rattled investors looking for clues about how U.S. consumers have adapted to historically high inflation and rising interest rates.
But on Tuesday, Walmart reported stronger sales and profits than expected in the three months to July and forecast a smaller decline in full-year earnings than it had warned investors before.
Walmart executives also said they had seen glimmers of improvement in recent weeks despite its most price-sensitive shoppers trading down to cheaper groceries.
Because shoppers’ gas and grocery bills have risen, many have cut spending on discretionary items such as clothing and non-essential merchandise.
Lower-income consumers were also seen to be trading down from deli meats to cheaper hot dogs, canned tuna and chicken.
But tougher times have also been a boon for Walmart, which has been seen gaining market share as higher-income shoppers, who would typically shop at places like Target, turned to its stores and e-commerce services to save money.
Home Depot (+4.06%), the DIY chain, reported its highest quarterly sales and earnings on record, saying that consumers were spending on home improvement despite high inflation and mortgage rates, with its business accelerating in recent weeks.
Investors welcomed the improved outlook from two of the largest U.S. retailers, pushing Walmart shares 5.1% higher and Home Depot’s shares up 4.1% on Tuesday, helping to lift other retail stocks as well.
