Major US retailers Walmart and Home Depot said sales growth accelerated heading into the 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 results for two of America’s biggest retail chains illustrate the resilience of consumer spending, even as shoppers face higher prices while retailers scramble to keep goods in stock.
Data released on Tuesday morning by the Census Bureau showed retail sales for the month of October surpassed expectations, as consumers and merchants alike look to stay ahead of potential supply woes during the Christmas rush. Sales were up 1.7 per cent from September amid gains for car dealers, home improvement stores and petrol stations, the data showed.
Businesses have been raising prices on a wide range of goods to offset higher supply chain costs, leading the consumer prices to rise at the fastest annual pace in three decades in October.
Many consumers are getting a head start on their holiday shopping amid warnings that some gifts may be hard to find this year because of supply chain bottlenecks. Retailers are already facing low levels of inventory in some categories, particularly apparel, as they gear up for what is expected to be a record-setting holiday.
Large stores are better positioned than many of their 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. Walmart said its US inventory improved by 11.5 per cent in the third quarter, indicating that shelves are stocked for the holidays.
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 rose 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 around $6.40, up from $6.20 to $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 has been able to meet “elevated home improvement demand that has persisted.”
Growth in the home improvement market cooled down 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 carry well into 2021.
