Walmart Inc. (WMT.N) boosted its yearly sales and profit projections on Thursday as shoppers sought grocery deals.

The top U.S. retailer by sales increased 1.5% in pre-market trade after reporting better-than-expected first-quarter results.

Walmart keeps grocery costs low to compete with Target Corp (TGT.N) and Kroger (KR.N) while Americans struggle to pay high food prices. Last Monday, the Commerce Department reported that home-cooked food prices declined for the second month in April but remained 7.1% higher than a year earlier.
Walmart is in a good situation, accounting for $1 of every $4 U.S. grocery spending. Walmart’s first-quarter sales, excluding fuel, climbed 7.4%, exceeding projections of 5.25%.

“We see a continuation of trade-down, certainly as consumers focus on maybe lower-price proteins or lower pack sizes, but we also see private brand penetration continue to do really well for us in the quarter,” CFO John David Rainey told Reuters.
Customers have less purchasing power, so they spend more on food and less on general commerce.

The business said strong food demand and affluent households helped U.S. comparable grocery sales grow in the low double-digits in the quarter.

Wellness items were also in demand.

Online shopping increased 27% in the quarter, increasing Walmart’s U.S. Ecommerce sales. Conversely, target’s digital comparable sales declined by 3.4% in the most recent quarter.

On a post-earnings conference call with analysts, CEO Doug McMillon said he was “uncertain” about the second half of the year due to “stubborn” dry grocery and rapid consumer inflation.
Walmart’s excellent results contrast Target and Home Depot’s poor expectations, which they blamed on weak consumer demand. Walmart predicted better second-quarter performance.

“Walmart’s solid quarter underlines the view that the big-box retailer… is better suited for the current economic climate than some of its industry peers, such as Home Depot and Target,” said Investing.com senior analyst Jesse Cohen.

Walmart has weathered the current operating climate better than its counterparts.

Walmart now estimates full-year profits per share of $6.10–$6.20, up from $5.90–$6.05. Refinitiv data showed analysts expected a $6.16 per share profit.

Net sales were expected to climb 3.5%, up from 2.5% to 3%.

Advertising, shipping, and fulfillment services contributed 17.3% to the first-quarter operating income. As a result, Walmart’s adjusted EPS exceeded expectations at $1.47.

First-quarter net revenue grew 7.6% to $152.30 billion, exceeding projections of $148.76 billion.