Walmart has reported a surprising and positive growth in its most recent quarterly report, giving hope to the country after Home Depot’s latest report warned that a huge recession could be coming to the U.S. soon.
With this good news, analysts expect even higher numbers in the third quarter, as the Federal Reserve is looking to make interest rate cuts soon.
Walmart’s Comments on a Possible U.S. Recession
With much talk surrounding a possible recession, Walmart has made comments that have boosted hopes in the country that there would not be a recession to do it. This market change was expected in return in the second quarter, but surprisingly, it gave a very strong report showing that there is hope.
A fall or rise in Walmart stocks and earnings usually signifies the state of the US economy, so experts and analysts usually monitor the company’s performance closely.
Why Does Walmart’s Report Give Hope?
Walmart’s report gives hope to analysts and experts about the overall US economy because this supermarket chain often leads the flock in showing the state of the economy every quarter.
For every $12 spent in US shops, one dollar is spent in Walmart, and in the second quarter of the year, its sales in America increased by 4.2%. This was a good report as experts did not expect a rise but a fall in its earnings.
A Strong Second Quarter
The company’s CEO, Doug McMillon, spoke to analysts on an earnings call on August 15th. He said that Walmart made strong sales and profits in the second quarter of the year and was pleased to reveal that the chain was also “not seeing a weaker consumer overall.”
Walmart’s shares increased by more than 6% in the second quarter. Walmart’s stock for the year has now increased by about 30%, giving hope to the U.S. economy.
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Home Depot’s Grim Warning
Walmart’s surprising second quarter results were enthusiastically received after Home Depot warned that the country’s high interest rates are having a huge impact on customers and could lead to a possible recession. In the second quarter of the year, Home Depot sales fell 3%, which caused a lot of worry for analysts and economists.
Like Walmart, the hardware company’s performance can be used as an indicator of the country’s economic state, which is why concerns were raised.
Stocks Climbing Higher
On the stock market, Walmart has continued to climb higher and higher. On the afternoon of August 15th, the S&P 500 company’s shares increased by 1.5 cents after its retail sales went higher than expected.
This shows an improved outlook from Walmart and helped to reduce the fear that Home Depot had previously put in the minds of people with its poor performance. The retail chain is on track to have a good third quarter that might also suppress expectations.
Federal Reserve Cutting Interest Rates
Analysts also noted that if the Federal Reserve cuts interest rates in September, there is a higher chance that the country will totally avoid recession.
According to Bret Kenwell, an analyst from eToro, “After a weak payrolls report, there were worries that the Fed waited too long to cut rates. While it would still be appropriate for the Fed to lower rates next month, today’s( August 15th) reports should buy them some time until the September meeting.”
Good News for the Future
Kenwell also said that this is good news that the country really needs at this point in time. “Investors and consumers want inflation to go lower, but not at the expense of the economy. Today’s stronger-than-expected retail sales figure quiets some of the recent fears that the US may be slipping into a recession.”
Therefore, if these strong retail sales continue in a positive direction, they should help the economy in the coming months.
U.S. Retail Sales Beats Expectations
Walmart is not the only retail shop that exceeded analysts’ expectations in the second quarter of the year. In July, retail sales across the country rose by one percent marking the highest it has been since January last year.
According to the Commerce Department, auto and gasoline sales also increased by 0.4%. Electronics, different appliances, and car sales also made noticeable strong gains in July, indicating a positive marker for the economy in general.
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How Did Walmart Do During the Great Recession?
Many people may be surprised to know that while the Great Recession was happening, Walmart was thriving. Back in 2008, the recession was at its worst, but Walmart was still one of the most popular stocks on Wall Street.
Many retailers struggled to survive the Great Recession, but Walmart kept increasing its growth as years went by. The company’s good performance during the tough time surprised many people and is still surprising to some to date.
Does Walmart Stock Do Well in a Recession?
History shows that Walmart does, in fact, do very well in a recession. The Great Recession showed that the company’s stock increased significantly while many others battled declines from all angles.
Many analysts and experts often say that Walmart’s stock is recession-proof, and looking at the records during tough times in the country, they have a solid point. If Walmart’s stock drops due to economic weakness, this is a huge indicator that the country will see a huge recession.
What Company Caused the Great Recession?
The cause of the Great Recession that started in 2008 was thanks to the failure (or high risk of failure) of many major global financial institutions in the country. Therefore, it did not happen solely because of one company and its workers.
However, one can note that it started with a huge move that was supposed to rescue Bear Stearns, the investment bank, in March of that year. Later in September, the failure of Lehman Brothers added to it.
How Is Walmart Performing Financially?
According to several reports and retail earnings calls, Walmart will be doing well financially in 2024. Even with the country’s current state, the retail chain continues to thrive, and its sales are expected to grow from 3.75% to 4.75% this year.
According to the Census Bureau, the company’s consumer spending decreased earlier this year but surged in July, marking its highest level in over a year.
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