Walmart Inc. raised its annual profit forecast again, but struck a cautious tone on consumers and the US economy.

Higher borrowing costs and the resumption of student-loan repayments will add to the strain on US household budgets in the coming months, Chief Financial Officer John David Rainey said Thursday on a conference with analysts and investors. After a strong first half of the year, the midpoint of Walmart’s profit forecast for the current quarter trailed analyst estimates.

“The consumer is still spending, but they’re being discerning in their spending,” Rainey said as Walmart reported results for the three months ended in late July. “There continues to be a reasonable level of uncertainty in the economic backdrop for the balance of the year.”

The mixed picture underscores Walmart’s success in grabbing more grocery sales from bargain-hunting shoppers — but also its vulnerability to pressure on US consumers, which may prompt some households to tap the brakes on spending in the second half of 2023. Earlier this week, Target Corp. and Home Depot Inc. reported comparable-sales declines as consumers pulled back from nonessential items.

Walmart was little changed in New York trading after reporting results. The shares climbed 12% this year through Wednesday, while the S&P 500 Index rose 15%.

Earnings Forecasts

Adjusted earnings for the fiscal year ending in early 2024 will be as much as $6.46 a share, Walmart said in a statement. The world’s largest retailer had previously capped its profit outlook at $6.20 a share. Wall Street had been estimating $6.28.

The annual outlook includes a headwind of only 5 cents a share from last-in, first-out accounting, compared with a previous forecast of 14 cents.

Healthy back-to-school demand is likely to bode well for the holiday season, Chief Executive Officer Doug McMillon said. Still, for the third quarter alone, Walmart forecast earnings of $1.45 to $1.50 a share. At the midpoint, that’s slightly lower than the average of analyst estimates compiled by Bloomberg.

“Concern remains on the potential for slower US consumer spending” in the second half of the year, Evercore ISI analyst Greg Melich said in a note to clients. “The low- to middle-income consumer appears strained.”

US Gains

During the fiscal second quarter, comparable sales at Walmart’s US unit climbed 6.4%, ahead of the 4% average of analyst estimates compiled by Bloomberg. For the company as a whole, adjusted earnings of $1.84 a share topped the $1.70 projected by analysts. Walmart said it’s seeing demand from customers at all income levels, and e-commerce jumped 24% in the US.

At Walmart’s international unit, operating income rose 2.2% during the second quarter after adjusting for currency fluctuations. The company called out sales gains in Mexico, China and at Flipkart, its majority-owned Indian business. At Sam’s Club, operating income increased 22%.

Walmart said Wednesday that Sam’s Club Chief Executive Officer Kath McLay will replace Walmart’s international chief, Judith McKenna, next month. McKenna will retire at the end of January.

(Updates share trading and details in first four paragraphs.)