Walmart captured 37% of the U.S. e-grocery market in the second quarter of 2024, according to data from the monthly Brick Meets Click/Mercatus Grocery Shopping Survey.
 

Walmart's growth accelerated

Excluding its subsidiary, Sam's Club, the retailer saw an increase of 150 basis points compared to the same period last year, reaching its highest share level to date.

Walmart's growth is closely tied to consumers seeking savings on groceries. The report attributes the retailer's sales boost to the impacts of rising inflation and interest rates, which have led to reduced personal savings and increased credit card debt among households.
According to the report, "Walmart's low prices and efficient omnichannel strategy have become increasingly attractive. The company's consistent and cost-effective online shopping experiences have been crucial in drawing and retaining customers."

Walmart has implemented various strategies, including first-party delivery, which have notably shifted market dynamics. The report highlights that mass retailers, spearheaded by Walmart, captured nearly half of all delivery sales in the second quarter, marking a significant change from the previous year.
 

Walmart's Q2 earning

Walmart (WMT) , which boasts a year-to-date advance similar to stocks in the Magnificent 7 tech group, has added more than $120 billion in market value as it continues to capture an increasing share of spending from price-focused consumers battling stubborn inflation.

Evercore ISI analyst Greg Melich anticipates that Walmart will "reaffirm its status as a relative safe haven amidst a volatile consumer backdrop" when it releases its fiscal Q2 earnings on Thursday. He expects the Bentonville, Ark., retailer to maintain its full-year sales and profit outlook.
Analysts forecast Walmart’s sales for the three months ending in July to reach $168.5 billion, reflecting a 4.3% increase from the previous year. Earnings are projected to rise 6.6% to 65 cents per share.

Earlier this spring, Walmart estimated earnings would come in at the higher end of, or slightly above, its standing forecast of $2.23 to $2.37 a share, with net sales rising between 3% and 4% from year-earlier levels.

Evercore's Melich expects an in-line quarter for the group, while issuing a "positive tactical call" on the stock heading into the Thursday report. 

"Risks to the call include potential for moderating demand trends after [the quarter-end, which] could cause Walmart to take a more conservative outlook on [the second half]; the risk of ongoing wage inflation, tech investment, and remodel spend, which could result in elevated [selling, general and administrative expense], increased ocean freight costs, and/or competition," Melich said. 

Consumers seen pulling back on spending

Consumers are showing signs of pulling back on spending due to several factors. Economic uncertainty and concerns about potential recessions are causing people to be more cautious with their finances.

 Rising inflation is eroding purchasing power, making essentials more expensive and leading consumers to cut back on non-essential items. Additionally, fears about job security and high levels of personal debt are prompting individuals to save more and spend less. Higher interest rates are also increasing the cost of borrowing, further discouraging discretionary spending. These factors collectively contribute to a noticeable reduction in consumer spending.
●Unemployment rose
With unemployment beginning to rise and the job market outlook becoming increasingly uncertain, analysts predict a reduction in consumer spending, which is expected to contribute to a broader economic slowdown.
●High inflation
Although inflation has decreased from the 40-year highs seen two years ago, it remains elevated. Interest rates, meanwhile, are at their highest in nearly 25 years following the Federal Reserve's aggressive rate hikes in 2022 aimed at controlling price increases. Additionally, household savings built up during the Covid-19 pandemic are depleting and may be nearly exhausted.
●Debt Levels
High levels of personal debt can lead consumers to cut back on spending to better manage their financial obligations. By reducing discretionary purchases and focusing on debt repayment, individuals aim to improve their financial stability and avoid overextending themselves.
●Market Conditions
Fluctuations in financial and housing markets can significantly impact consumer confidence and spending behavior. When markets are unstable, individuals may become more cautious with their expenditures, affecting overall economic activity. Conversely, stable or rising markets can boost confidence and encourage increased consumer spending.

 

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