Why Walmart's Q2 beat shows consumers aren't 'comfortable' yet

Walmart (WMT) reported second earnings results that beat estimates on both revenue and profit, prompting the company to raise its full-year guidance for the second time this year. Fortune tech correspondent Jason Del Rey joins Catalysts to discuss what these results reveal about the state of the consumer.

Del Rey observes that consumers "are still working hard to find value," with Walmart's success this quarter "driven in large part by being aggressive on value." He also highlights the big-box retailer's efforts to add "convenience measures," such as pickup and delivery services, which are "paying off" for the company.

The strong performance of a budget retailer like Walmart raises questions about whether consumers are still under pressure. "I do think the fact that high-income consumers are still looking for value, as Walmart says the' value-convenience combination,' I think that says we're not quite out of the woods yet," the author of Winner Sells All: Amazon, Walmart and the Battle For Our Wallets tells Yahoo Finance. "I think that's indicative that other than the very wealthiest consumers, people don't feel comfortable yet with where we are."

Catch the full interview with Walmart Chief Financial Officer John David Rainey from Thursday morning.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Angel Smith

Video Transcript

The consumers still spending as retail sales soared last month.

And that's not the only sign of a strong consumer, Wal Mart out this morning with its earnings results, shares are actually hitting a record high.

The company raised its guidance for the year.

Here's what Wal Mart CFO, John David Rainy told me last hour about the health of the consumer.

There was no step down in July as some had expected and that's generally our outlook for the year.

There's certainly um reason to be measured in the outlook when you consider that we have an election coming up in the US.

You've got unrest overseas, but uh the consumer is still hanging in there.

They're being choiceful, they're being discerning, they're looking for value and focusing on those things that are essentials versus the discretionary items.

Joining us.

Now, we wanna bring in Jason Del Rey.

He's the author of the book winner sells All Amazon Walmart and the Battle for our wallets.

Jason, it's great to have you here.

So I'm curious, just give me a sense of wrap this all up for us and tell us maybe what we could expect going forward because we got retail sales out this morning.

Very strong.

You take a look at Walmart's guidance here.

The fact that they raised it obviously a good sign here for consumers.

What does that ultimately tell us just about the catalyst?

Maybe that we could see or that the consumer is going to provide here for the economy going forward.

Yeah, I mean, obviously a great sign that we did not see a weakening here.

I think consumers are still working hard to find value.

I think we talk about Walmart's great quarter.

Um, all things considered and that's driven in large part by being aggressive on value, discounting rollback, but also the convenience measure.

I think a lot of consumers while they're trying to, you know, just make their budget work, they've been trained to expect convenience as well.

And so Walmart's investments in pickup delivery and the like, um I think are paying off, talk to me about Jason kind of the headline that you took away from the earnings when it comes to the consumer because sometimes when you've got better earnings from a Wal Mart, it can indicate that wealthier consumers are starting to trade down or the CFO loves to say for the second quarter in a row they are trading in, is that potentially a sign of consumers struggling?

Yeah, I mean, I've thought about that a lot and, and that is, you know, that is something I'm thinking about, obviously, you know, a wor worse result for Walmart, I think would have been worse all around.

But I do think the fact that high, you know, high income consumers are still looking for value, as Walmart says, the value convenience combination, I think that says we're not quite out of the woods yet.

Um, store brands are still really popular.

Um, and so I think that's indicative that, um, other than the very, very, um, wealthiest consumer, um, people don't feel comfortable yet with where we are and I think people are just continue to looking for value.

Jason, what does it tell us about?

Are we going to see further divergence and between the segments or the sectors of winners and losers?

Listen again, I'll, I'll go back to the value and convenience combination.

I think obviously, you know, I cover Amazon very closely at, at Fortune magazine as well.

And um they're pushing in both of those directions at the same time, Walmart um in their own ways, pushing both value and convenience.

I think there are very few companies that can do both very well, can invest in both price cuts and, you know, express delivery and great pickup offerings.

And so yes, I think, you know, beyond those two, there are not many mass retailers that can really provide both.

Um And I think that's what consumers are still looking for, especially in a market, you know, in an uncertain market like this one.