Walmart Raises Its Outlook as Shoppers Look for Bargains

Target’s quarterly sales increased a modest 0.5 percent. The retailer maintained its full-year guidance, but said “based on softening sales trends” in the most recent quarter, it was planning for a wide range of sales outcomes in the second quarter.

Overall sales at T.J. Maxx’s parent company increased 3 percent. Its T.J. Maxx and Marshall brands, which offer name-brand items to shoppers at discounted prices, posted an increase, but sales at HomeGoods declined 7 percent. It maintained its full-year guidance and forecast an increase in sales of 2 to 3 percent.

Analysts said the sales declines were a sign of consumers being more selective about what they purchase, along with spending patterns gaining some semblance of normalcy after being less predictable during the pandemic. Broadly, the economy has remained resilient, with wage growth strong and jobs being added across a wide range of industry.

“We’re not seeing a collapse of revenue,” Simeon Siegel, managing director at BMO Capital Markets, said. “We’re seeing revenue disappointments. Consumers are still spending on the things that they decide they want to spend on.”

Retailers are facing a profit challenge. Walmart said on Thursday that its gross profit rate, or the difference between the cost of the goods and their sales, fell to 23.7 percent, slightly missing Wall Street’s estimates. The decline came in part because shoppers were buying more groceries and products in its health and wellness category and less general merchandise. Groceries typically have lower profit margins for retailers than discretionary categories like apparel.

Target said on Wednesday that its gross margin rate increased to 26.3 percent from a year earlier, when it had a glut of inventory and supply chain costs were higher. It said higher prices also helped lift that number. But Target warned that shrink, the industry’s term for inventory that entered a store or warehouse but left without be accounted for, would hurt its profitability by more than $500 million compared to last year.

Retail analysts have expected that company margins would be thinner this quarter, given more promotions to entice shoppers to spend and customers buying more items like groceries that bring in lower profits.