Walmart posted some strong results in e-commerce and advertising sales in comparison to one of its key competitors—Amazon—as it also surpassed Wall Street’s diminished profit expectations for the second quarter and offered a less dire annual forecast after slashing its outlook three weeks ago.

Results improved more than expected in late July thanks to a boost from back-to-school sales, lower fuel prices and more buying by wealthier customers seeking bargains, Walmart CEO Doug McMillon told analysts Tuesday. The retail giant has slowed inventory growth and will be well positioned for the holiday season, he said.

Walmart’s global e-commerce sales were up 12% in the quarter, compared to 1% in its fiscal first quarter and compared to 7% for Amazon last quarter.

Walmart also reported its global ad revenue rose “nearly 30%” last quarter, which is a slowing from the “more than 30%” reported in the first quarter, but still ahead of the 18% growth for Amazon. (Note: Walmart doesn’t report dollar figures for e-commerce or ad sales on a quarterly basis—but both are a considerably lower base than Amazon’s.)

“I can’t remember a business with the margin structure here at Walmart of the advertising business, and having 30% growth in the quarter was nice to have,” McMillon said on an earnings call. He said Walmart recently has made improvements in how it attributes in-store transactions to their advertising buys.
McMillon said he hopes the just-announced deal with Paramount+ will help it add more Walmart+ members and offset any effects from an economic downturn.

Walmart U.S. CEO John Furner said entertainment was the top feature members mentioned in research outside of delivery as a benefit they want from the program.

Walmart’s upbeat tone suggested it’s making headway in adapting to changing consumer-spending habits after a July 25 cut to its profit forecast that shook investors and spurred fears of a broader economic downturn. Soaring US inflation is forcing shoppers to pay more for essentials, eroding sales of more profitable items and prompting Walmart to mark down prices of apparel and other goods.

The shares rose as much as 5.9% in New York, the most intraday since September 2020. Walmart fell 8.4% this year through Monday, trailing the 1.6% decline in an S&P index of consumer-staples companies.

Adjusted earnings were $1.77 a share during the second quarter, Walmart said Tuesday, topping the $1.63 average of analysts’ estimates compiled by Bloomberg. Sales rose 8.4% to $152.9 billion in the fiscal second quarter, which ended July 31, Walmart said. Analysts had predicted $151.1 billion.

During the year as a whole, earnings per share will fall no more than 11%, compared with last month’s warning of a drop of as much as 13%. Operating income will also fall less than expected, Walmart said. The company reiterated its outlook for a 3% gain in comparable sales at its US stores during the second half, excluding fuel.

Walmart’s profit warning last month was the second cut to the company’s annual forecast. In May, Walmart said earnings per share would dip about 1%. In February, the company had predicted a modest increase.

—Bloomberg News