Walmart raised its annual sales and profit forecast on Thursday (Nov 16) for the second straight quarter, signalling a strong start to the holiday season.

The US retail giant has used its size and scale to keep prices low despite inflation, drawing in not just low-income shoppers but also more high-income consumers looking for cheaper options to stretch their budgets.

The strong demand for low-priced products from groceries to clothing and gifts, coupled with better in-stock levels, has helped Walmart take more market share from other retailers – including dollar stores – in recent months.

Walmart now expects fiscal 2024 earnings per share of between US$6.40 and US$6.48, up from its prior forecast of US$6.36 to US$6.46.

It sees comparable sales for the full year rising in a range of 5 per cent to 5.5 per cent, compared with an increase of between 4 per cent and 4.5 per cent estimated previously.

“We’re excited to get an early start to the holiday season,” CEO Doug McMillon said.

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Walmart’s bigger focus on groceries has also provided a bulwark against the broad slowdown in discretionary spending – more than half of the company’s merchandise comprises food, and other daily essentials, while at rival Target discretionary goods take up a majority of the shelf space.

Profit margins have also improved for Walmart – rising 32 basis points in the third quarter, as the company takes less clearance compared to last year when an inventory glut had forced margin-sapping promotions. Easing supply chain costs have also helped.

The retailer’s upbeat forecast echoes that of Target, which on Wednesday projected fourth-quarter earnings above estimates thanks to tighter inventory control.

Walmart is also doubling down on holiday merchandise across a wide range of price points to attract inflation-hit customers looking to make Christmas purchases on a budget. For instance, gift baskets on the Walmart US website cost from as little as about US$15 all the way up to nearly US$140.

Comparable sales, or sales at Walmart’s US stores open at least a year, rose 4.9 per cent in the third quarter ended Oct 31, excluding fuel, above estimates of 3.35 per cent. Online sales at Walmart rose 15 per cent.

The company posted an adjusted profit of US$1.53 per share in the third quarter. Analysts on average were expecting a profit of US$1.52 per share. REUTERS