The nation’s largest retailer maintained its yearly financial projections on Thursday, counting on continued demand from budget-conscious shoppers seeking affordable groceries and growth in online sales amid challenging economic conditions across the United States.
The retail giant has maintained low prices on food and essential items as household budgets remain tight, with gas prices climbing above $4 per gallon nationwide and inflation staying high.
Retailers across the country have reported increasing strain on consumer spending this year, with consumer confidence dropping to record lows in May and inflation posting its biggest increase in three years.
The Iran war has also driven up costs for certain raw materials including resin and packaging materials, adding additional pressure to supply chains still recovering from extensive import tariffs imposed last year.
The company kept its annual net sales growth target at 3.5% to 4.5% and adjusted earnings per share between $2.75 and $2.85. Industry analysts had previously described this outlook as conservative in February, anticipating the retailer would increase these projections throughout the year.
CAUTIOUS SECOND QUARTER
Although the retailer has remained largely protected from weak spending impacts so far, the company under CEO John Furner expressed caution regarding second-quarter expectations, projecting sales and profits below analyst estimates.
Increased fuel expenses affected the company’s operating income by approximately 250 basis points, and the retailer said it worked to absorb these costs in its delivery operations to maintain low prices.
“While consumers are telling us they’re feeling some pressure, sales strength has persisted and we saw one of our strongest quarters of share gains,” the company said.
Smaller competitor Target increased its annual sales outlook based on its emerging turnaround strategy, though executives urged caution, while grocery chains Kroger and Albertsons offered conservative yearly projections.
The retail giant, which exceeded first-quarter comparable sales expectations, has been drawing more affluent customers seeking convenience and enrolling in its delivery programs.
Online sales surged 26% in the first quarter and its share of total sales increased significantly compared to the previous year.
The company’s U.S. gross profit rose 29 basis points, supported by increases in membership revenue and advertising.
“Our results reflect our continued focus on delivering across the enterprise — better shopping experiences, a broader assortment, and faster delivery,” Furner said.
The retailer’s first-quarter total U.S. comparable sales, excluding fuel, increased 4.1%, compared with analyst estimates of a 3.8% rise, according to data compiled by LSEG.
The company projects second-quarter net sales to grow 4% to 5%, compared with estimates of a 5.09% increase and adjusted earnings per share of 72 cents to 74 cents, versus expectations of 75 cents.
