How Walmart just proved there is no recession looming

Those on Wall Street sounding the alarm of a looming U.S. recession should dig into Walmart’s latest earnings report as it just doesn’t look like negative GDP growth is on the horizon.

The world’s largest retailer said Thursday that third quarter earnings came in at $1.08 a share adjusted, beating analyst forecasts for $1.01. Total revenue clocked in at $124.89 billion versus forecasts for $125.55 billion. Walmart lifted its full year U.S. same-store sales guidance to “at least” 3% from “about” 3% previously. Earnings are now seen in a range of $4.75 to $4.85 a share compared to $4.65 to $4.80.

Walmart shares popped about 1.5% on the news.

But several numbers within Walmart’s report suggest the U.S. consumer is in find standing ahead of the critical holiday shopping season. That shouldn’t be a surprise seeing as U.S. unemployment is hovering near record lows, consumer confidence is around an 18-month high and hourly wages are on the rise.

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1. Mandarin oranges in cans
2. Rawhide for pets

3. Hair care

(Photo by: Jeffrey Greenberg/UIG via Getty Images)

4. Other bath prep

(REUTERS/Lucas Jackson)

5. Dog leashes, dog collars

(REUTERS/Caitlin Ochs)

6. Cat leashes, pet costumes
7. Hard luggage
8. Luggage, tote bags, duffle bags, handbags
9. Travel bags
10. Handbags

11. Backpacks

(Photo by Bradley C. Bower/Bloomberg via Getty Images)

12. Rolled wrapping paper
13. Gas grills
14. Makeup mirrors

15. Vacuum cleaners

(Photo by Tim Boyle/Getty Images)

16. Toothbrush replacement heads
17. Electric razors

18. Air conditioners

(Photo by Stephen Hilger/Bloomberg via Getty Images)

19. HDMI cables, video cables, extension cords, auxiliary cords
20. Oil-less fryers and toaster ovens

21. Bicycles

(Timothy Fadek/Bloomberg via Getty Images)

22. Futons
23. Wooden furniture

24. Miscellaneous furniture, like infant pack-and-plays or patio furniture

25. Mattresses

(Photo by Milbert O. Brown/Chicago Tribune/MCT via Getty Images)

26. Christmas lights

(Patrick T. Fallon/Bloomberg via Getty Images)


Here’s where Walmart put recession worries to rest:

  • Walmart U.S. eCommerce sales rose 43% from the prior year. The gain was a quicker pace than the second quarter’s growth rate of 40%.
  • Walmart saw strong sales gains at its two key U.S. businesses. Walmart’s U.S. same-store sales, a key retail industry metric, rose 3.4%. Sam’s Club, which tends to skew toward a higher income customer, notched a 3.2% same-store sales increase. The division’s eCommerce sales gained 32%.
  • Customer traffic and average ticket increased 1.2% and 2.2% at Walmart U.S., respectively. It’s often very positive to see both of these metrics increase at the same time for a retailer, especially one of Walmart’s size. Traffic spiked 6.2% at Sam’s Club.

What may leave Walmart bulls concerned though are pressured profit margins. Walmart’s gross profit margin dropped to 24.08% from 25.04% a year ago amid rising transportation and labor costs. Expense cuts, benefits of the Trump administration’s corporate tax cut and share repurchases helped cushion the profit margin hit for Walmart.

But hey, at least there is unlikely a recession coming…says Walmart.

Brian Sozzi is an editor-at-large at Yahoo Finance. Follow him on Twitter @BrianSozzi

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