On August 15, Walmart’s stock price rose by more than 8%. As of the close of the day, the stock price rose 6.58% to US$73.18.

Source：uSMART SG

Financial reporting is the main driver

On August 15, Wal-Mart Group released its financial report for the second quarter of fiscal year 2025, showing its steady development strength, prompting investors to be optimistic about its stocks. In this financial quarter, Walmart's total revenue reached US$169.335 billion, achieving a year-on-year growth of 4.8%. Net profit attributable to parent companies fell 43% year-on-year to US$4.501 billion. Total revenue in the first half of fiscal year 2025 achieved a year-on-year growth of 5.4%, reaching US$330.841 billion, and net profit attributable to shareholders increased slightly by 0.4% to US$9.605 billion.

It is worth noting that Wal-Mart's performance in the Chinese market is particularly strong. In the second fiscal quarter, Walmart China's net sales reached US$4.6 billion, a year-on-year increase of 17.7%, and the growth momentum has expanded for two consecutive years. Among them, the growth of Sam's Club stores and e-commerce business is particularly significant. The e-commerce penetration rate in the second fiscal quarter reached 49%, an increase of 200 basis points year-on-year, while e-commerce sales increased by 23% year-on-year, the same as last year's growth rate. In addition, the optimization of product mix also contributed to the increase in gross profit margin.

The financial report also revealed Walmart’s optimistic expectations for fiscal year 2025 performance. The company expects net sales to grow 3.25% to 4.25% in the fiscal third quarter, while net sales for the full fiscal 2025 are expected to grow 3.75% to 4.75%. This positive performance guidance reflects Walmart's confidence in the development of its business.

U.S. retail sales data in July exceeded expectations, has spending power increased again?

According to the latest data from the U.S. Department of Commerce Census Bureau, U.S. retail sales increased by 1% month-on-month in July, hitting the highest level since February 2023, far exceeding market expectations of 0.4%.

Notably, consumer spending increased significantly across nearly all categories, with the exception of sporting goods and bookstores, which saw sales decline. Car sales performed particularly strongly, with month-on-month growth reaching 0.66%. In addition, non-seasonally adjusted sales also showed a strong rebound. At the same time, the number of people filing for unemployment benefits in the United States last week was 227,000, lower than the 235,000 expected. Overnight index swaps (OIS) show that the market expects the Fed to cut interest rates at its September meeting by about 29 basis points.

The July retail sales data released by the United States exceeded expectations, indicating that American consumers are still resilient in the face of high prices, allowing Wall Street to ease concerns about a U.S. recession. However, is Wal-Mart’s growth really due to rising consumer power in the United States? After experiencing rising prices and interest rates in recent years, as well as the slowdown in the job market this year, American consumers have begun to seek more cost-effective consumption. Even though U.S. inflation has dropped to its lowest level in three years, Americans are still paying higher prices than ever for groceries, housing and many goods. It can be said that Wal-Mart relies on its low-price strategy to stand out.

Walmart’s secret to success is “low prices”?

In fact, the financial reports of other consumer goods giants are not satisfactory. American consumers have shown caution when facing the mid-to-high-end entertainment consumption of Disneyland, Starbucks' high-priced iced coffee and McDonald's expensive Big Mac meal. However, their loyalty to Walmart has not diminished because it offers great value for money on groceries, household essentials and other products. This reflects that consumers are more inclined to look for cost-effective shopping options under economic pressure.

It is reported that Walmart has invested billions of dollars in recent years to modernize its stores and build a strong online business. The company has used its advantages of scale and gains from its high-margin business to support a price war in an effort to gain a favorable position against Amazon. Wal-Mart's core customer base has historically been low- and middle-income shoppers, but the company has recently been actively expanding into high-income customer groups, successfully attracting consumers with an annual income of more than $100,000, and expanding its market share in this market segment. Walmart said it continued to grow its market share among higher-income households in the last quarter. Walmart does an excellent job of providing consumer value, which has become even more important in the current economic climate. From a structural perspective, Wal-Mart is fully prepared to respond to market changes.

In addition, although the recent retail sales data in the United States performed well, Goldman Sachs analyst Chris Hussey reminded investors to be cautious about changes in the data. He pointed out that since the outbreak of the epidemic in 2020, the reliability of market survey data has declined. Although the "beat-than-expected" performance of retail sales seems to support the idea of ​​a "soft landing" for the economy, the actual economic situation may not be as optimistic as the data shows.

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