The world’s largest retailer is one of the first major U.S. chains to report quarterly results that provide insight into consumer health, especially after the government reported an unexpected deterioration in the labor market, raising fears of a recession.

Walmart’s results suggest that consumer spending remains stable despite several years of above-average inflation. Inflation is also showing signs of moderating. “We have not seen any additional strain on consumer health in our business,” Walmart Chief Financial Officer John David Rainey said in a conference call after the earnings release – a view the company has held for several quarters.

The retailer’s comments contrasted with those of its competitors Amazon and Home Depot, which urged consumer caution, even among their more middle- and upper-class customer bases.

According to LSEG, Walmart’s comparable sales in the U.S., which include online sales and sales at stores open for at least a year, rose 4.2 percent, well above the 3.3 percent increase expected by analysts.

Those sales were boosted by strong demand for fresh foods, especially fruits and vegetables, and high-quality meats, Walmart said. Shoppers also spent more money on personal care and beauty products, and when it came to health and wellness, they preferred brand-name drugs over generics.

The company found that higher-income customers, particularly those with annual incomes over $100,000, contributed significantly to sales of furniture, appliances, clothing and toys, resulting in significant market share gains in these categories.

The retailer reported a 16% increase in membership and other revenue during the quarter, contributing to a 22% increase in online sales in the U.S. Walmart’s U.S. business generates 60% of its nearly $650 billion in annual sales.

Walmart’s U.S. CEO John Furner said on the conference call that strong sales trends with back-to-school shopping continued into August. He said about half of customers had not yet completed their purchases.

“US consumer sentiment appears to have stabilized compared to the beginning of the year, which is encouraging given concerns about an impending economic slowdown,” said Arun Sundaram, analyst at CFRA Research.

However, Steven Shemesh, an analyst at RBC Capital Markets, noted that an increase in the number of higher-income customers at Walmart could be a sign of concerns about the economic situation. On the other hand, it also underscores the success of Walmart’s investments in e-commerce, he said.

“While others face consumer weakness, Walmart is one of the few companies that can gain market share in this environment,” Shemesh said.

Walmart’s weight in the grocery business has largely insulated the company from broader economic pressures. The company has also invested strategically in modernizing stores and merchandise, as well as services such as pickup and delivery, helping it gain market share from rivals such as Target.

“Walmart’s significant investments in pricing, store quality, technology and supply chain have enabled the company to continue to gain market share, likely offsetting what we perceive to be a lower spending environment,” said Scot Ciccarelli, analyst at Truist Securities.

Target, whose shares rose 4 percent following Walmart’s results, will release its quarterly report next Wednesday.

Walmart forecast annual adjusted earnings per share between $2.35 and $2.43 and consolidated net sales growth in the range of 3.75 percent to 4.75 percent. Both forecasts were above previous expectations of $2.23 to $2.37 per share and sales growth of 3 percent to 4 percent.

Second-quarter earnings were 67 cents per share, beating analysts’ expectations of 65 cents, according to LSEG. Total revenue rose 4.8% to $169.3 billion, beating Wall Street forecasts of $168.53 billion.

Walmart shares rose as much as 8.4% to a record high of $74.44. The blue-chip stock has gained 30.7% in 2024 through Wednesday’s close, outpacing the S&P 500’s 14.4% gain.