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Walmart Stock Leaps After Q2 Earnings Beat, Improving 2022 Profit Outlook

“We’re pleased to see more customers choosing Walmart during this inflationary period, and we’re working hard to support them as they prioritize their spending," said CEO Doug McMillon.

Updated at 10:59 am EST

Walmart  (WMT)  posted stronger-than-expected second quarter earnings Tuesday, while trimming its expected profit decline for the year, as the world's biggest retailer appears to be shifting excess inventory and benefiting from the ongoing reduction in gas prices.  

Walmart said adjusted earnings for the three months ended in July came in at $1.77 per share, down one penny from the same period last year but well ahead of the Street consensus forecast of $1.62 per share.

Group revenues, the company said, were tabbed at $152.9 billion, an 8.4% increase from last year that topped analysts' estimates of $150.81 billion. U.S. same-store sales rose 6.5% from last year, the company said, firmly topping the Refinitiv forecast. Inventories, which were up 33% from last year at the end of the first quarter, narrowed to a 25% gain over the three months ending in July.

Looking into the back half of the year, Walmart said it sees adjusted earnings declining by between 9% and 11% from 2021 levels, compared to its late-July forecast of a slump of between 11% and 13%.

“We’re pleased to see more customers choosing Walmart during this inflationary period, and we’re working hard to support them as they prioritize their spending," said CEO Doug McMillon. "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 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," he added. "We continue to build on our strategy to expand our digital businesses, including the continued strength we see in our international markets.”  

Walmart shares were marked 6% higher in early trading  following the earnings release to change hands at $140.60 each.

Late last night, Walmart also completed a deal with Paramount Global  (PARA)  to give Walmart+ members access to the media group's "essential" streaming plan, and ad-based subscription that typically costs $4.99 per month. Walmart+ costs $12.95 per month. 

Walmart may be getting a mid-summer boost from the recent pullback in U.S. gas prices, which the American Automobile Association pegged at $3.949 on Sunday -- the lowest since early March -- could be an accelerant to what is already described as a solid start to back-to-school sales in the United States.

Bloomberg data suggests Americans are spending $400 million less each week as a result of the decline in gas prices, which have fallen for 59 consecutive days, and a good portion of that savings is likely to find its way back into Walmart revenues heading into the October quarter and beyond.

Consumer sentiment is also on the mend, with data from the University of Michigan last week showing expectations at a five-month high even as the survey's closely-tracked tally of current conditions remained muted.