Walmart serves up a home-cooked earnings beat as consumers go for value

Overflowing cart… of half-priced paper towels. Walmart shares jumped 7% yesterday after the world's largest retailer unloaded an earnings beat. Its revenue grew 5% to $169B last quarter as its global ecomm sales jumped 20%. Walmart said higher-income customers accounted for most of its new customer gains as shoppers traded down. Even after rolling out price cuts and summer sales events, Walmart boosted its annual profit and sales forecast, signaling demand is strong. Merch sales (think: air fryers, sun dresses) rose for the first time in 11 quarters — a good omen for consumer spending.

• The Costco effect: Walmart’s Sam’s Club attracted record-high memberships in Q2, with half of new sign-ups coming from Gen Z and millennials.

“We’ve got Chipotle at home”… Even after annual inflation hit its slowest pace in three years, food prices have stayed high, especially at restaurants. While US grocery prices are up 1% year over year, restaurant prices have popped 4%. As folks opt to save $$ by cooking at home, discount retailers are in a sweet spot. Walmart’s dominated in groceries — which make up over half of its US sales — capturing a record 37% of online grocery sales in Q2. Rivals like Target and Aldi have cut prices to keep up (FYI: Target reports on Wednesday). Meantime, chains like McDonald’s and Starbucks have been pushing “value” with promos as their sales fall.