Walmart's shares are experiencing a downturn today.
Walmart's shares are taking a dip on Thursday, with the stock losing 6.3% as of midday ET. This downward trend is happening even as the broader S&P 500 and Nasdaq Composite also experience a 0.8% and 0.8% loss respectively.
The cause of this drop can be traced back to Walmart's earnings report, which it released before the market opened. Despite delivering a impressive Q4 performance – reporting EPS of $0.66 on sales of $180.55 billion – investors were left worried by the company's weak guidance for the future.
The holiday season was particularly strong for Walmart. Global e-commerce growth surged by 16% year over year, while overall sales grew by a solid 5.3%. CEO Doug McMillon was optimistic about the company's future, stating, "We're gaining market share, our top line is healthy, and we're in great shape with inventory." He added that the company's focus for the upcoming year would be on "growth, improving operating margins, and strengthening ROI."
However, despite this promising outlook, Walmart's future prospects seem to be clouded by uncertainty. CFO John David Rainey warned on CNBC that the company won't be entirely immune to tariffs – especially those imposed on Mexico and Canada. This revelation, along with growing concerns over inflation, led Walmart to forecast sales growth of only 3% to 4% for the next year. This pessimistic outlook sent shares plummeting.
In fact, Walmart's expectations for 2025 earnings per share are as much as 27 cents lower than analyst estimates. Similarly, the company predicts first-quarter earnings at just 57 cents to 58 cents, which is significantly below the 64 cents analysts anticipated.
Furthermore, global e-commerce sales growth has slowed down compared to the previous quarter, rising by only 16% instead of the 27% in the previous period. This could suggest a broader pullback in consumer spending, which could negatively impact Walmart's sales.
Consumer spending trends also appear to be shifting. With higher costs for credit and groceries, consumers are becoming more cautious with their big-ticket purchases. December sales were revised higher, possibly indicating a post-holiday season spree. However, this might just be a reflection of consumers tightening their belts widespreadly.
The retail sector is currently grappling with numerous economic challenges. The sharp decline in January retail sales, attributed to cold weather and potential new price hikes, serves as a stark reminder of the industry's struggles. Given that 70% of the U.S. economy is consumer-driven, a broader pullback in consumer spending could have significant consequences beyond Walmart's sales.
In conclusion, while Walmart had a solid Q4 and holiday season, the company's shares have taken a hit due to weak guidance and economic uncertainties. These include tariff concerns, slower e-commerce growth, shifting consumer spending trends, and overall economic challenges.
- Investors were concerned about Walmart's future despite its impressive Q4 earnings due to the company's weak guidance, which pointed towards a sales growth of only 3% to 4% for the next year.
- The company's CFO, John David Rainey, revealed on CNBC that Walmart won't be entirely immune to tariffs, specifically those imposed on Mexico and Canada, which added to the investor worry.
- Walmart's expectations for 2025 earnings per share are as much as 27 cents lower than analyst estimates, further affecting investor confidence in the company's financial performance.
- The sharp decline in January retail sales, attributed to cold weather and potential new price hikes, indicates the industry's struggles and suggests that a broader pullback in consumer spending could have significant consequences beyond Walmart's sales.
