Walmart expects small drop in annual profit, announces $20 billion share buyback

(Reuters) – Walmart Inc forecast a small drop in annual profit on Tuesday as demand for groceries grew despite higher prices, while discounts on clothing and electronics lured inflation-hit shoppers to stores at one of America’s top retailers.

The company raised its full-year net sales expectations and announced a new $20 billion share buyback plan, sending its shares up 5% in premarket trading.

Even as shoppers cut back on discretionary spending amid decades of high inflation, sales of the food and other essentials that fill most of Walmart’s shelves have proven resilient.

The company’s heavy discounting and focus on keeping prices lower than competitors have also helped it gain market share from smaller players.

However, those moves have hit the company’s gross profit margin, which fell 89 basis points in the third quarter ended Oct. 31.

The company expects adjusted earnings per share to decline by 6% to 7% in fiscal 2023, compared to a previous forecast of a decline of 9% to 11%.

Walmart expects fiscal 2023 net sales to increase 5.5%, up from its previous forecast of a 4.5% increase.

Total third-quarter revenue rose 8.7% to $152.81 billion, beating analysts’ estimates of $147.75 billion.

Walmart enters the holiday quarter with nearly $65 billion worth of inventory, up from $60 billion three months ago.

However, Walmart forecast same-store sales for the holiday quarter, excluding fuel, to increase 3%, rather than the estimate of a 3.4% rise. Adjusted earnings per share are expected to fall 3% to 5% in the fourth quarter, compared with analysts’ estimates of a 4.5% decline.

FedEx and Amazon have warned of a slump in holiday season demand in recent weeks.

(Reporting by Uday Sampath in Bengaluru and Siddharth Kavale in New York; Editing by Sriraj Kallu)

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