• by Sarah Mahoney  @mahoney_sarah, August 17, 2023

Walmart’s grocery mojo keeps on growing, fueling gains in both sales and profits. Comparable sales increased an impressive 6.4% in the U.S., with online sales soaring. And the company raised forecasts for the remainder of the year, confident those trends will continue.

Revenue rose 5.7% to $161.6 billion, compared to $152.9 billion in the second quarter of 2022. Ecommerce gained 24%, and sales in Walmart Connect, the company's ad business, jumped 36%.

Strength came from grocery, where Walmart continues to gain market share, with private label brands gaining. Sales of health and wellness products were also strong, powered by increases in diabetes medications. But, like rival Target, which just reported a downturn in sales, Walmart sales in discretionary items, including apparel, “declined modestly.”

Operating income climbed 6.7% to $7.3 billion, versus $6.9 billion in the prior year.

Both sales and profits topped Wall Street expectations.

The company now predicts a sales rise of 3% in the next quarter and between 4% and 4.5% for the full fiscal year. The more optimistic forecast reflects confidence in continued momentum and ongoing customer response to Walmart’s value proposition.

In a conference call webcast for investors, Doug McMillon, president and chief executive officer, outlined ways shoppers of all demographics are looking for more value.

“Families are discerning,” he said. “They are setting priorities.” That includes choosing more in-home meal options and increasing general merchandise that speaks to more home cooking, such as hand-held and stand mixers.

“We see people across income cohorts looking to save money, and that allows us to drive conversion,” he said. “They are looking for value.”

And while discretionary sales were soft, they were still better than the company thought they would be, inspiring confidence that these non-grocery purchases will continue to gain in the months ahead as Walmart draws more higher-income customers away from other retailers.

And while it is still relatively early in the season, he said sales of back-to-school items are already ahead of company forecasts.