Walmart Eases Market Fears, Lifts Consumer Sector ETFs | ETF Trends

Consumer sector-related exchange traded funds strengthened Tuesday after Walmart Inc. (NYSE: WMT) revealed it was in better shape than it appeared, following an outlook warning a few weeks prior.

On Tuesday, the VanEck Vectors Retail ETF (RTH) rose 2.0%, the Vanguard Consumer Staples Index Fund ETF Shares (VDC) gained 1.2%, the Fidelity MSCI Consumer Staples Index ETF (FSTA) increased 1.2%, and the Consumer Staples Select Sector SPDR Fund (XLP) was up 1.1%.

Meanwhile, Walmart shares advanced 5.0%. WMT makes up 7.6% of RTH’s underlying portfolio, 6.9% of FSTA’s, 6.7% of VDC’s, and 4.6% of XLP’s.

Walmart’s quarterly earnings report revealed that big box retailer’s earnings and revenue beat analysts’ expectations for earnings and revenue, despite the decrease in consumer demand for discretionary goods in face of heightened inflationary pressures. On the other hand, the retailer attracted greater demand for consumer staples, such as low-priced foods and daily essentials.

“The actions we’ve taken to improve inventory levels in the U.S., along with a heavier mix of sales in grocery put pressure on the profit margin for Q2 and our outlook for the year. We made good progress throughout the quarter operationally to improve costs in our supply chain, and that work is ongoing. We continue to build on our strategy to expand our digital businesses, including the continued strength we see in our international markets.” Doug McMillon, president and CEO of Walmart, said in a note.

The more optimistic tone this time around suggests that Walmart could be adapting to the changing consumer spending habits as more Americans go out and spend money on experiences and cut back on discretionary spending in face of rising prices. The update helped alleviate some of the previous concerns when the retailer issued a profit warning toward the end of July, which fueled fears of a broad economic slowdown.

“We certainly hope to put the pressures that we’ve had in the first half behind us as quickly as we can,” McMillon told analysts, adding that annual profit will pull back less sharply than previously anticipated. “But as you can see in our guidance, we acknowledge reality” in face of rising prices.

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