Walmart Emerges As a Winner, Despite Evidence of Consumer Spending Slowdown. Time to Buy the Stock?

Consumers continue to spend, but there are also some signs that purchases are beginning to slow. In the restaurant sector, popular chains such as Starbucks and McDonald's have seen their U.S. same-store sales decline as consumers have pushed back on higher prices.

The travel industry is starting to see an effect as well. Walt Disney recently came out and said it was seeing less traffic at its popular theme parks, while airlines and hotels have indicated that leisure demand is starting to soften.

However, one company that isn't seeing an effect from a potential consumer slowdown is retail giant Walmart (NYSE: WMT).

Strong Q2 earnings and outlook

Walmart turned in strong first-quarter results, with revenue rising 5% to $169.3 billion and its adjusted earnings per share (EPS) up 10% to $0.67. That topped the analyst consensus, which was looking for revenue of $168.6 billion and adjusted EPS of $0.65.

In the U.S., Walmart store sales rose 4% to $115.3 billion, while same-store sales jumped 4.2%. The gains came from a 3.6% jump in the number of transactions, and a 0.6% increase in average ticket. E-commerce sales, meanwhile, climbed 22%.

Walmart+ memberships increased by double digits as customers enjoy the convenience of getting items delivered directly to their homes in about three hours. General merchandise sales rose for the first time in 11 quarters, while its health and wellness categories benefited from sales of GLP-1 drugs.

Internationally, Walmart sales jumped 7% to $29.6 billion, and were up over 8% in constant currencies . The company saw strength from Walmex (Mexico), China, and Flipkart (India e-commerce). International e-commerce sales rose 18%.

Sam's Club U.S., its warehouse store concept, saw sales rise nearly 5% to $22.9 billion. Same-store sales, excluding fuel, increased 5.2%. Transactions climbed 6.1%, while the average ticket was down 0.8%, and memberships climbed over 14% year over year. The company said its Scan and Go initiative was resonating with customers, with penetration now above 30%. The technology is now in 380 locations.

Image source: Getty Images.

Looking ahead, Walmart has forecast third-quarter sales to increase between 3.25% to 4.25% and for adjusted EPS to be between $0.51 to $0.52.

For its full year, the company increased its sales guidance to growth of between 3.75% to 4.75%. The retailer also upped its full-year adjusted EPS forecast to a range of $2.35 to $2.43.

Why Walmart is winning

Walmart's Q2 results once again showed that it is a winner in the retail space. Inflationary pressures in the past few years have led to skyrocketing prices in many areas, with customers looking for value. This has led even many higher-income earners (over $100,000) to start shopping at Walmart, and it appears that they like their experience.

The retailer has long been a price leader given the buying power it gets from its size and scale, which it passes along to its customers. At the same time, the company has been looking to lure higher-income and younger customers in through things such as its Walmart+ membership, which offers customers great convenience on top of industry-leading prices. Walmart is also the U.S.'s largest grocer, and has upped its game by offering fresh food, better quality meats, and fresh produce in recent years.

So, while Walmart is likely to continue to benefit from the current trade-down effect that may be happening, there's also a good chance that it will keep these new higher-income customers even when the economy is robust. That makes the company a winner in any environment.

WMT PE Ratio (Forward 1y) data by YCharts

Trading at a forward price-to-earnings (P/E) ratio of about 27 times next year's analyst estimates, the stock is not cheap on the surface. However, sometimes you need to pay up a bit for a company with the growth and defensive qualities that Walmart possesses. As such, I think Walmart stock will continue to be a long-term winner.

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks, Walmart, and Walt Disney. The Motley Fool has a disclosure policy .