Major US retailers Walmart and Home Depot said sales growth accelerated heading into the Christmas holiday season, in a sign that consumers are willing to open their wallets in the face of mounting inflationary pressure.
Walmart, the world’s largest retailer, on Tuesday raised its financial outlook for the third straight quarter, overcoming industry-wide supply chain logjams to boost inventory and post stronger sales than anticipated in the lead-up to the holidays.
Home Depot’s quarterly revenues also blew past Wall Street’s expectations as rising home prices encouraged Americans to continue investing in their properties. The momentum continued into the early part of the holiday season, with comparable sales running strong in the first two weeks of November, chief financial officer Richard McPhail said on an earnings call.
The results for two of America’s biggest retail chains illustrate the resilience of consumer spending, even as shoppers face higher prices while retailers try to keep goods in stock.
Data released on Tuesday morning by the Census Bureau showed retail sales for October surpassed expectations, as consumers and merchants alike sought to ward off potential supply woes during the Christmas rush. Sales were up 1.7 per cent from September amid gains for car dealers, home improvement stores, petrol stations and electronics retailers, the data revealed.
Businesses have been raising prices on a range of goods to offset higher supply chain costs, leading the consumer prices to increase at the fastest annual pace in three decades in October.
Many consumers are getting a head start on their Christmas shopping amid warnings that some gifts may be hard to find this year because of supply chain snags. Retailers are facing low levels of inventory in some categories, particularly clothing, as they gear up for what is expected to be a record-setting holiday.
Walmart said it had chartered its own vessels and rerouted deliveries to less-congested ports in order to keep goods moving. Its US inventory improved by 11.5 per cent in the third quarter, indicating that shelves are stocked for the festive period.
Home Depot has received most of the goods it expected for the fourth quarter, even though there are about 95 ships still anchored off the shore of California, according to chief operating officer Ted Decker.
Large stores are better positioned than many smaller peers to manage supply delays, as well as rising prices for goods and the cost of getting them on to shelves, from shipping fees to store wages.
Arun Sundaram, analyst at CFRA Research, said Walmart “is navigating the tough supply chain environment well” and that its increase in US inventories “should result in a strong holiday season”.
Comparable sales at Walmart’s US stores rose 9.2 per cent year on year in the three months to the end of October, eclipsing analysts’ forecast for 7 per cent growth. Total revenue climbed 4.2 per cent to $140.5bn, boosted by improving store traffic and US market share gains in the grocery department.
Walmart’s net income fell 40 per cent to $3.1bn as costs rose. Adjusted earnings surged to $1.45 per share from $1.34, beating estimates for $1.40 per share.
Walmart now expects US comparable sales growth for the full year to be above 6 per cent, compared with previous guidance for 5-6 per cent growth, along with a gain of about 5 per cent in the holiday quarter. Walmart also forecast full-year adjusted earnings per share of about $6.40, up from $6.20-$6.35.
Home Depot booked a 6.1 per cent year-on-year jump in comparable sales for the three months to the end of October, surpassing the 1.4 per cent increase that analysts expected.
Revenues were up 9.8 per cent to $36.8bn overall, with net income of $4.1bn, or $3.92 per share, up from $3.4bn, or $3.18 per share, in the same period a year ago. Analysts were looking for earnings per share of $3.40 on revenues of $35bn.
Craig Menear, chair and chief executive, said Home Depot had been able to meet “elevated home improvement demand that has persisted”.
Growth in the home improvement market cooled over the summer, coming off a blockbuster year for DIY sales, fuelled by homebound consumers. Resurgent demand from professional contractors and builders, who are responsible for a large chunk of Home Depot’s revenues, has helped the home improvement boom persist well into 2021.
Walmart and Home Depot boosted by solid sales growth ahead of Christmas
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