NEW YORK, May 13 Reuters Walmart39;s earnings amid signs of weaker discretionary spending could add fuel to a rally that has propelled its shares to record highs, or potentially spook investors looking to justify the heavyweight retailer39;s pricey valuation.

As Walmart gears up to report its firstquarter earnings on Thursday, Americans continue to spend heavily online, driven by demand for cheaper products. Known for its bargainpriced merchandise, Walmart is facing especially stiff price competition online from Amazon and newcomers like PDD Group39;s Temu in key categories such as personal care products, clothing and electronics.

Walmart39;s stock has climbed 15 so far in 2024, better than the SP 50039;s 9 rise, increasing pressure on the company to provide strong results.

Shares of Walmart recently traded at about 25 times expected earnings, up from a 10year average valuation of about 20, suggesting investors expect strong profit growth, according to LSEG data.

Wall Street anticipates Walmart to report nearly 6 growth in net income for its first quarter ending April 30, per LSEG. Earnings per share are expected to hit 52 cents, the top end of Walmart39;s forecast provided in February.

But those expectations come as Walmart contends with higher than average inventories. General merchandise, a crucial category for Walmart, generated 114 billion in sales or a quarter of its total revenues in the year ended January 2024.

Walmart replenished its inventories at a slower…