Dive Brief:

• Beating analyst expectations, Walmart on Thursday reported its first-quarter total revenue rose 6% year over year to $161.5 billion.
• Walmart’s U.S. comparable-store sales excluding fuel rose 3.8% year over year during the quarter and its U.S. business recorded mid-single-digit growth in grocery — a category that saw strong unit growth led by produce and meats in fresh food. 
• Walmart President and CEO Doug McMillon said during the earnings call Thursday that growth in units sold, transaction counts and market share gains, including in general merchandise, are among the current key factors driving positive momentum. 

Dive Insight:

Walmart’s consistent focus on value, selection and the shopping experience is resonating with customers, McMillon told investors Thursday. “We expect to continue to earn healthy levels of sales growth and simultaneously grow profit faster than sales this year while managing our price gaps and investing in our associates at the same time,” he said.

Chief Financial Officer John David Rainey said more customers are shopping with Walmart more often and across more categories. Additionally, Rainey noted the number of U.S. marketplace sellers grew 36% for the quarter, pushing the SKU count to over 420 million. During the quarter, marketplace sales in furniture, sporting goods, kids apparel and home grew more than 20%, Rainey said.

But consumer wallets are still stretched. Rainey said people are opting or needing to spend more on non-discretionary items and less on general merchandise.

“In a tightening consumer economy, Walmart is showing very few signs of fatigue as it churns out yet another strong set of results,” GlobalData Managing Director Neil Saunders said in emailed comments.

And higher income consumers are continuing to divert more of their consumables spending to Walmart, according to Saunders. GlobalData found that Walmart has increased its share of households that earn over $100,000 by over 2 percentage points during the last three years. While that reflects broad acceptance of the company’s value proposition, going forward the retailer will need to deepen its relationship with that demographic as inflation drops, which could make further gains challenging, he said.

The retailer's merchandise mix continues to hinder margins, Rainey said, adding that Walmart U.S. is pursuing strategies to improve general merchandise sales and to increase the visibility of its e-commerce brand assortments in fashion, home and electronics.

Global e-commerce sales grew 21% led by store-fulfilled pickup and delivery, as well as growth in Walmart’s marketplace. 

In the U.S., Walmart’s net sales rose 4.6% from the year-ago period to $108.7 billion and its operating income grew 9.6% year over year to $6.8 billion.

Growth across various segments and markets indicate that Walmart “is on a path to drive consistently higher sales and profits," Jefferies analysts led by Corey Tarlowe said in a Thursday note.

The Q1 earnings report comes just days after the retailer confirmed it eliminated hundreds of corporate jobs. It also asked “the majority” of its remotely employed associates, along with those in offices in Dallas, Atlanta and Toronto, to relocate. Most will move to the company’s Arkansas corporate headquarters.

Walmart last month also announced it’s closing its U.S. health centers. McMillon on Thursday said “given reimbursement rates and cost to serve, we could no longer see a path to achieving an acceptable level of profitability” for the initiative.

Walmart raised its Q2 and full-year guidance, and now expects second-quarter net sales to increase 3.5% to 4.5%. Full-year net sales are projected to come in at the high end or slightly above its previous outlook of 3% to 4% growth. “That said, we're one quarter into a year that still has some degree of uncertainty and we don't want to get ahead of ourselves,” Rainey said.