The retail industry was a little spooked after Walmart’s warning to the industry regarding their profit margins about a month ago, but their earnings finally arrived on Tuesday as this is “Retail Week” for investors.
In what has been another green flag for the economy, Walmart, along with Home Depot, reported positive earnings that fueled market gains on Tuesday. Walmart’s revenue rose by 8.4 percent to $152.9 billion as consumers paid more for items in their store, although it was for less which was indicated by decreased volume. Walmart expected their operating income to decrease by a sizable amount when they released their warning statement, but their report today showed that it shrunk by a smaller margin than expected, which is significant because this is an important measure of profitability for retailers. Walmart experienced a good boost from back-to-school shopping and groceries from high-income customers, while gas prices falling have also been a positive. Walmart’s warnings were correct as items with lower profit margins were selling compared to early pandemic favorites that brought a lot of money to the company, but it was better than expected which was the theme of this earnings.
Home Depot witnessed the same things, with their sales rising by 6.5 percent to $43.8 billion despite a decline in transactions. Earnings per share sat at $5.05, an increase from last year. A big part of this has been high-value transactions, or purchases over $1,000, which pushed Home Depot’s revenue over the top. CFO Richard McPhail credited the numbers to the housing market, which has created wealth for homeowners that caused them to buy products for home renovation or other projects. These two companies helped the Dow outperform the S&P 500 and NASDAQ, and it sets a good standard in the market before retail data arrives on Wednesday.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.