- Forecasts are for higher revenues and lower profits
- Clues sought on tightness of the labour market
- Big-ticket spending has been brought forward
US discount retailer Walmart (WMT: NYSE) is expected to report a 5% increase in third-quarter revenues to $147.8 billion, and earnings per share at the top end of company guidance ($1.32), around 9% lower year-on-year, when it reports tomorrow (15 Nov) according to data compiled by Refinitiv.
Walmart is the largest private-sector employer in the US with around 1.6 million workers, so investors will be interested to learn more about the trends in wage inflation and the tightness of the labour market.
The company, seen as a bellwether of the economy, shocked the market in the second quarter after laying-off around 200 workers and slashing its profit and sales outlook as consumers pulled in their horns, spending less on big ticket items.
Last month, the firm said it would lay-off a further 1,500 workers at its e-fulfilment centre in Atlanta to make way for its conversion into a support hub for the Walmart Fulfilment Services business which relies heavily on marketplace sellers.
INVESTOR FOCUS ON INVENTORIES
Investors will also be keen to find out if Walmart has managed to reduce its bloated inventories which built up as a result of changing consumer spending patterns.
According to analysts at Bank of America, US big box retailers anticipated a wave of demand which failed to materialise as consumers switched from spending on goods to spending on services like travel and entertainment.
Walmart blamed rising food and fuel prices for the crop in spending and expects more pressure on general merchandise in the back half of the year.
With inflation at a four-decade high, consumers have become more cautious on discretionary spending. Adobe Analytics is forecasting the lowest increase in US ‘Black Friday’ holiday sales since 2015.
However, there is evidence consumers have brought-forward their spending even earlier than usual after retailers offered attractive discounts on big-ticket items to balance inventories ahead of Christmas.
Shares in Walmart have recovered since the sharp falls seen in May and are unchanged on the year.
