Yahoo Finance Live rounds up retail earnings reports from several big box retailers such as Walmart, Target and Home Depot.
DIANE KING HALL: Let's get right into a retail roundup. We've been on retail detail all week long. You've got Walmart in focus today out with its quarterly report card. You're seeing shares higher by about 2%. The retailer beating on both the top and bottom line, raising its full year forecast. We saw strength in groceries, significant strength in grocery and its e-commerce business. Overall, a solid showing for Walmart.
The story was a little different over at Target yesterday. Same store sales almost flatline in Q1, while digital sales slumped 3.4% from a year ago. Target saw a big issue with in-store theft. CEO Brian Cornell said that could trim profits this year by $500 million. Overall, there's a pattern emerging that consumers are being more selective in their purchases, avoiding bigger ticket items. Even Walmart talked about that.
And we saw that at Home Depot, which came out with a brutal earnings report on Tuesday. The retailer out with a big warning on sales after its biggest revenue miss in over 20 years. That report showing consumers are backing off of those big projects that we saw during the pandemic and spending less on things like patios and grills. They don't need them anymore, right, Brad?
BRAD SMITH: Well, yeah.
DIANE KING HALL: And we spoke to Walmart CFO John David Rainey earlier, and he said shifting consumer spending is having an impact on business. Let's take a listen to that.
JOHN DAVID RAINEY: We continue to see, as you noted, a mixed shift in our business. As consumer wallets are stretched more thinly, they're shifting more of their dollars to purchasing items like food and consumables and less away from general merchandise. And overall, that does have an impact on our business because general merchandise tends to be higher margin for us. But even despite that, we were able to grow operating income in the quarter 17% and increased our guidance for the year as well.
DIANE KING HALL: Shares of Walmart, again, take a look at that. They are trading on the plus side after those strong first quarter earnings. We'll talk about all of this in the retail sector that we're seeing. And we've done this before where we look at different companies and sectors reporting. And we have that tale of two cities kind of scenario, where you have a Walmart versus a Target.
BRAD SMITH: Yeah. So holistically here, we've had a lot of the retail companies reporting over the course of this week give us a picture of where consumers are continuing to spend and where they are not. And if you're listening to even the comments from CFO of Walmart, John David Rainey who spoke with us here on Yahoo Finance, one of the things that he leaned into actually was in the top line of their report here.
And particularly on the first bullet item that they laid out saying that they saw gross margin rate decline by about 18 basis points. And that was on a mix of sales. That is something that you've heard from the likes of Target even. And so even as they're signaling the same thing, the results are coming in different. And it's because of some of the other categories here.
Now, let's remember Walmart is one of these stalwarts of grocery. And as long as they're able to continue to have that engagement with customers, get them in the store for groceries at large scale. This is a company that going into the pandemic had about 25% of the US grocery market. And so now compounding years later on what they've been able to do with that, investing further into their digital, and buy online, pick up in store or pick up and not even go in store in some cases.
At the end of the day, Walmart has created significant touchpoints both in the digital and the in-store capacity for themselves to the point where on the digital side, they were able to see e-commerce up by about 27%. And what did they say that was led by? Pick up and delivery. That brought their US comp sales growth up 7.4% here as well. So all in for Walmart.
It's a larger question of now going forward, even as we were listening to the commentary from the conference board in the consumer confidence index just weeks ago, consumers did become more pessimistic during the month of April about the outlook for business conditions and labor markets.
But when it comes back to their spending and how they are going to continue to look across those markets and what they're hearing on the R-word recession that really perhaps curtails some of their discretionary spending. For companies like Walmart, they're hoping to play up at least in their mix shifts where those necessities still play a major role in that customer relationship.
DIANE KING HALL: And again, it was clear that grocery was key in those numbers with grocery accounting for 60% of sales. So it was clear that consumers-- they have picked a major sector to play in, and consumers are being very cautious with their dollars. And Walmart is the beneficiary of necessities. But Walmart did notice that consumers were being more choosy about size. So like packaging size and also not necessarily picking a name brand.