Walmart hikes sales and earnings forecast as it attracts shoppers across incomes

The retailer said it expects full-year net sales to climb between 4.8% and 5.1%, up from its previous expectations of 3.75% to 4.75%. It said it expects its adjusted earnings per share to range from $2.58 to $2.63, a slight raise from its prior range of $2.52 to $2.62.

It marked the second quarter in a row Walmart hiked its full-year forecast. 

Walmart's earnings report is the first since the Arkansas-based company announced a leadership change. The big-box retailer said last week that John Furner, the CEO of its U.S. business, will succeed longtime CEO Doug McMillon on Feb. 1.

In an interview with CNBC, Chief Financial Officer John David Rainey said consumer habits didn't change during the quarter, as shoppers spent selectively and looked for deals. He said Walmart has gained those "value-seeking" customers across incomes, both because of the economic backdrop and its own strategic moves.

"Consumers are looking to do business with those companies that are providing value, that are delivering the convenience that they've come to know and expect, and that are executing consistently well," he said.

He said Walmart saw an impact from the pause in Supplemental Nutrition Assistance Program, or SNAP, benefits, formerly known as food stamps, during the prolonged government shutdown. But he said "that's starting to rebound now that people are receiving those funds again."

Here is what the big-box retailer reported for the fiscal third quarter compared with Wall Street's estimates, according to a survey of analysts by LSEG:

As of Wednesday's close, shares of Walmart are up about 11% so far this year. That trails the S&P 500's nearly 13% gains during the same period. 

As a retail giant that draws shoppers across incomes, Walmart is closely watched as an indication of the health of the U.S. consumer and how President Donald Trump's tariffs are affecting the prices shoppers pay. It can speak to consumer behavior across categories, since it sells discretionary items like makeup and clothes along with necessities like milk and toilet paper.

Walmart has gained more high-income customers as even affluent households sought relief from pricier grocery bills due to high inflation in recent years. That cohort also has responded to store remodels and faster deliveries. 

Those gains continued in the most recent quarter, as Walmart has looked to offer better convenience along with prices, Rainey told CNBC.

Some of those shoppers have come to Walmart for speed, Rainey said. The retailer can now deliver to about 95% of U.S. households from stores in under three hours.

Customers now expedite about a third of its online orders from stores to arrive in one- or three-hour timeframes, he said. He said revenue related to those faster deliveries has increased 70% year over year. The company charges a fee for some of those faster deliveries and others are included as a benefit of its subscription-based membership program, Walmart+.

The service is popular, even with shoppers with lower incomes, he said. During the weeks of November when SNAP benefits were paused, Rainey said Walmart noticed a dip in that volume.

In the three-month period that ended Oct. 31, Walmart's net income increased to $6.14 billion, or 77 cents per share, from $4.58 billion, or 57 cents per share, in the year-ago period.

Excluding one-time items, such as business reorganization charges, Walmart's adjusted earnings per share was 62 cents.

Revenue rose from $169.59 billion in the year-ago quarter. 

Comparable sales for Walmart U.S. rose 4.5% in the third quarter, excluding fuel, compared with the year-ago period. That surpassed analysts' expectations of 4% growth, according to StreetAccount. The industry metric, also called same-store sales, includes sales from stores and clubs open for at least a year.

At Sam's Club, comparable sales rose 3.8%, excluding fuel. 

Walmart e-commerce sales grew by 27% globally, as all segments of the company posted sharp gains. In the U.S., e-commerce rose 28%, driven by increases in store-fulfilled delivery of online orders and growth of advertising and its third-party marketplace.

E-commerce sales internationally jumped 26% and at Sam's Club in the U.S., they rose 22%.

In the U.S., shoppers made more trips to Walmart and spent more on those visits. Customer transactions rose 1.8% and average ticket increased by 2.7%.

As Walmart gains more digital traffic and adds more products to its third-party marketplace, advertising has been a meaningful growth area, too. In the quarter, its global advertising business increased by 53%, including Vizio, the smart TV maker it acquired last year for $2.3 billion. Its U.S. advertising business, Walmart Connect, grew 33% year over year. 

Like other retailers, Walmart has said it raised prices on some items to offset higher costs from tariffs. About a third of what Walmart sells in the U.S. comes from other parts of the world, with China, Mexico, Canada, Vietnam and India representing its largest markets for imports, Rainey told CNBC in May.

On a call on Thursday, Rainey said when it comes to higher tariff costs, "the pressure is real." Yet, he said Walmart's team has been able to reduce the impact on customers by finding ways to absorb some costs.

Walmart's results on Thursday followed cautious updates from Target, Home Depot and Lowe's. All three of those retailers lowered their full-year profit outlook this week and referred to consumers who were hesitant to make big purchases and hungry for deals. 

T.J. Maxx and Marshalls parent company TJX, on the other hand, hiked its full-year forecast, saying it's seeing a "strong start" to the holidays as it caters to value-conscious shoppers.

Rainey said Walmart is "going into the holiday pretty optimistic," saying it's prepared with competitive price points.