Daily Brief: Walmart Is Doing A Good Job Of Undercutting Its Rivals

Daily Brief: Walmart Is Doing A Good Job Of Undercutting Its Rivals

about 2 years ago3 mins

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Walmart reported better-than-expected quarterly earnings on Thursday, as the US retailer nabbed customers from right under rivals’ noses.

What does this mean?

Like most retailers, Walmart continued to wrestle with supply chain issues last quarter: the company spent around $400 million more on shipping than planned, even chartering its own cargo ships to make sure products arrived on time. And like most retailers, it’s been forced to raise prices to offset some of those rogue costs. But unlike most retailers, Walmart has the sheer size and negotiating clout with suppliers that allowed it to undercut rivals on price, which allowed it to gain market share in groceries and other key areas.

Walmart same store sales

So it follows that Walmart made almost 6% more revenue from its existing US stores last quarter than the year before, and its outlook for 2022 came in better than expected too. To top it off, Walmart announced it’ll buy back $10 billion worth of its own shares this year, which will reduce their supply and push up their price. No surprises here, then: investors sent its stock up 3% after the update.

Walmart stock
Source: Google Finance

Why should I care?

The bigger picture: Is inflation overblown?

Nearly 90% of all Americans live within 10 miles of a Walmart, which means it’s hard not to shop with the retailer. That makes its update a unique insight into how consumer spending is holding up more generally. Walmart’s strong results, then, suggest that high inflation hasn’t necessarily been the deterrent that many economists have warned, and the company’s optimistic forecast suggests it might not be going forward either.

Zooming out: Lucky number 13.

Then again, Walmart is in a particularly strong spot: it sells all sorts of products that Americans need no matter what. Products like those of consumer staples company Nestlé, which reported on Thursday that its organic sales – those excluding the effects of acquisitions and currency swings – grew at their fastest in 13 years last year.

Keep reading for our next story...

Nvidia Posted Record-Breaking Earnings, But Its Stock Still Fell

Nvidia image

Nvidia reported better-than-expected quarterly results earlier this week, but let’s just hope the chipmaker’s AI ambitions don’t start getting out of hand…

What does this mean?

Nvidia outdid itself last quarter – literally, given that its data center and gaming businesses both broke records. Its data center segment brought in around 70% more revenue than the same time in 2020, as more and more companies turned to its chips to power their artificial intelligence services – from speech recognition to fraud detection. Meanwhile, revenue from Nvidia’s gaming business grew almost 40%, mostly driven by bumper sales of its latest video game chip. And while Nvidia’s auto segment saw a 14% drop-off in revenue, that was only to be expected: carmakers have been cutting back on production.

Either way, Nvidia’s overall revenue for the quarter rose by 53% to hit a new all-time high. So now it’s brimming with confidence: the chipmaker thinks demand isn’t going anywhere fast, and its outlook for this quarter came in far better than expected too.

Nvidia stock vs peers

Why should I care?

For markets: Close, but no cigar.

Nvidia’s bragging rights were short-lived, with investors sending its stock down after the update. That could be because they’d already taken the chipmaker’s record results and high-growth forecast into account: Nvidia’s share price has, after all, outperformed an index that tracks the world’s biggest chipmakers by nearly 70% in the last year. In other words, record-breaking earnings weren’t enough: Nvidia needed to smash expectations.

The bigger picture: Nvidia’s the odd one out.

There is one sign that chipmakers might not be feeling quite as confident as Nvidia. See, Applied Materials – which makes the machinery chipmakers use to make their chips – posted a weaker-than-expected revenue outlook for this quarter earlier in the week. And since Applied supplies chipmaking giants like TSMC and Intel, its muted prediction suggests they might be planning to limit their spending plans going forward.

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