To The Moon

$Wal-Mart(WMT)$ delivered a Q2 earnings report that surprised investors, beating estimates for the quarter and raising guidance for the next quarter and full year, and management's strong statement that it was "not seriously impacted by the overall weakness in the consumer environment" surprised the market.Surprised, so after the announcement of the earnings jumped more than 6%.

For such an old supermarket chain, carry through the inflation cycle, suffer from rising costs, stepped on the pit of excess manpower, but actually through the operation strategy, not only to solve their own problems, but also among the ranks of the leaders of the "digital age", enjoy the benefits of the times.The success of the "boat can also be turned around" practical experience, to all managers to teach a lesson.

Performance Overview

Q2 FY2025 revenues reached $153 billion, up 6% year-over-year, exceeding market expectations.

Net income of $5.0 billion and earnings per share (EPS) of $1.80 exceeded market expectations.

Overall same-store sales grew 4.2%, beating market expectations of 3.4%, with the

• In North America, same-store sales grew 5.5%, thanks to increased consumer demand for everyday items, with sales of food and home furnishings particularly strong. In addition, the e-commerce business outperformed, with year-over-year online sales up 10%, as consumers increasingly preferred to shop online.

• International business performance was slightly weaker, with revenue up 2% year-over-year.We performed well in some markets, such as Mexico and Canada, but faced challenges in others, such as China and India.

• Sam's member stores continued to perform strongly, with continued membership growth, 8% year-on-year revenue growth, and more compelling merchandise and services to enhance user stickiness.

  

  

Outlook Guidance

Walmart is optimistic about its future outlook and expects overall sales to continue to grow in fiscal 2025.

• Q3 revenue growth is expected to be in the range of 3.25% to 4.25% see, above market expectations of 3.5%;

• EPS of $0.51 to $0.52, slightly below market expectations of $0.55.

• Full-year EPS is expected to be $2.35-$2.43, below market expectations of $2.45.

The company plans to further invest in e-commerce and logistics to enhance its competitiveness in the market.In addition, Walmart has emphasized its focus on cost control to cope with possible economic uncertainties.

Investment highlights

Success of Low Pricing Strategy

Wal-Mart's Everyday Low Pricing (EDLP) strategy has given it a significant position in the retail market.Consumers, under economic pressure, tend to choose cost-effective products, and Wal-Mart fulfills this demand.Especially in the U.S., when consumers are dissatisfied with high-priced goods (e.g. $Walt Disney(DIS)$ Disneyland tickets and $Starbucks(SBUX)$ coffee), they are more willing to buy groceries and household necessities at Wal-Mart, which shows that Wal-Mart's low-priced strategy is effective in attracting price-sensitive customer groups.

Investment and Market Expansion

Walmart has invested billions of dollars in store remodeling and online presence in recent years, aiming to enhance the shopping experience and compete with Amazon.Such investments have not only enhanced its competitiveness in the market, but also attracted consumers with annual incomes of more than $100,000, expanding its market share.This suggests that Wal-Mart's low-price strategy is not limited to low and middle-income groups, but is gradually attracting a broader base of consumers. $Costco(COST)$ $Home Depot(HD)$ $Dollar Tree(DLTR)$

Economic Pressure and Consumer Behavior

Although Wal-Mart's results exceeded expectations, Goldman Sachs analysts note that the growth does not necessarily reflect improved consumer conditions.Rather, consumers are choosing the more affordable Walmart under economic pressure, possibly because they have had to cut back on spending.This shift does not signal an economic recovery, but rather reflects consumers' coping strategies in the face of uncertainty.

The fragility of consumer confidence

Walmart's beat was seen as a sign that consumers are in good shape, but in reality, consumer purchases may be motivated by unease about the economic outlook.Goldman Sachs' analysis suggests that retail sales data have become less reliable since the 2020 epidemic, and that investors should be wary of them.In this case, Walmart's success may not be as optimistic as it seems.