Walmart Surges, Home Depot Stumbles: Retail Giants Navigate Conflicted Economy

There is such a slew of conflicting indicators and commentary on the economy swirling around these days that it may be hard to get a grip on how the consumer is doing.

Walmart Inc. (NYSE:WMT), the world’s largest retailer, beat Wall Street forecasts for second-quarter profits and sales as it posted $4.5 billion in net profit, down from $7.89 billion a year ago, and $169 million in revenue, up from $162 million in revenue a year earlier.

It also raised its full-year outlook by forecasting revenue to increase from 3.75% to 4.75%, up from previous guidance of a 3% to 4% rise in revenue, and adjusted earnings to range from $2.35 and $2.43 per share, up from prior expectations between 3% and 4%, CNBC reported.

During Thursday’s earnings call, CFO John David Rainey said consumers are spending money, but economic indicators are still prompting the retail giant to proceed carefully.

“While we have not seen any additional fraying of consumer health in our business, other economic data out there, as well as the state of affairs globally, would suggest that it’s prudent to remain appropriately cautious with our outlook,” he said.

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Two days earlier, fellow retail giant Home Depot Inc. (NYSE:HD) cut its sales outlook for 2024, saying it expects a 3% to 4% decline in comparable sales versus the 1% dip that it forecasted previously as it sees consumers holding back on spending due to elevated interest rates.

“There’s just a lot of noise with political and geopolitical environment, unemployment ticked up, inflation keeps eating away at disposable income,” CEO Ted Decker said during Tuesday’s earnings call.

“And I think people just took a pause as we progress through the quarter or more of a pause because of these macro uncertainties.”

Home Depot posted a $4.7 billion profit for the second quarter, up from $4.6 billion a year ago. Revenue came in at $43.2 billion, up 0.6% from a year earlier, while comparable sales fell 3.3% year over year.

Meanwhile, retail sales in the U.S. grew 1% month over month and 2.7% year over year in July, according to Thursday’s report from the Department of Labor, but credit-card delinquencies rose $27 billion during the second quarter to a record $1.14 trillion, according to an Aug. 6 report from the Federal Bank of New York.

While higher retail sales, though getting funded by credit cards, may indicate that consumers are doing okay, falling commodity prices suggest otherwise, CNBC reported.

The Invesco DB Base Metals Fund (NYSE:DBB) is down more than 7% over the past month, while crude oil futures dropped 14% from July 5 through Aug. 5.

"In terms of commodities, the entire asset class is coming under pressure," Rob Ginsberg, managing director at Wolfe Research, told clients in a note.

"We see this broad decline in commodity prices as yet another warning about the state of the economy."

And while retail sales showed an upswing, the Department of Labor’s July jobs report showed unemployment rose 0.2% from June to 4.3%.

Read Next:
• Home Depot CEO Says ‘Inflation Keeps Eating Away At Disposable Income’: Are Home Repairs Being Put Off Due To The Economy?

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