Photo: Getty Images
Shares of Walmart Inc. were hit hard Thursday after the retail behemoth provided a disappointing earnings outlook, including a warning for the first year-over-year decline in quarterly profit in three years.
“The company’s guidance assumes a generally stable consumer and continued pressure from its mix of products and formats globally,” Walmart said in a statement.
The downbeat guidance offset beats in profit, sales and same-store sales for the fiscal fourth quarter through January, and a 13% hike to the company’s dividend.
The stock
WMT
-6.53%
dropped 6.5% on Thursday. The selloff came four days after the stock closed at a record high, and was its worst day since it lost 8.1% on Nov. 16, 2023.
The weakness was also weighing on shares of some of Walmart’s rivals, as Costco Wholesale Corp.’s stock
COST
-2.61%
fell 2.6% and Target Corp. shares
TGT
-2.00%
shed 2%, to underperform the S&P 500 index’s
SPX
-0.43%
0.4% decline.
Chief Executive Doug McMillon said on the post-earnings call with analysts that the mix pressure the company has been seeing is from the continued shift in demand toward products that are less profitable (lower margin) — particularly groceries and health and wellness, which includes the pharmacy business — and away from higher-margin general merchandise items.
In the U.S., Chief Financial Officer John David Rainey said, grocery was a “standout” in the latest quarter, with sales growth in the mid-single-digit percentage range, compared with overall comparable sales growth of 4.6%.
For health and wellness, Rainey said growth was even faster, in the mid-teens percentage range, “due largely to GLP-1 sales.” GLP-1 refers to the class of diabetes and obesity drugs that includes Novo Nordisk’s
NVO
+0.41%
Ozempic and Wegovy and Eli Lilly & Co.’s
LLY
+0.70%
Mounjaro and Zepbound.
When asked on the call how President Donald Trump’s tariffs and their potential effects on consumer spending might impact results, Rainey said, according to a FactSet transcript: “We don’t have any explicit assumption in our guidance around tariffs. We feel like we’ll be able to navigate that.”
Walmart said it expects first-quarter adjusted earnings per share of 57 cents to 58 cents, down from 60 cents a year ago and below the FactSet consensus of 64 cents.
That would be the first year-over-year decline in quarterly adjusted EPS since the results for the quarter that ended in April 2022.
For the full year of fiscal 2026, adjusted EPS is projected to be $2.50 to $2.60, which surrounds fiscal 2025 EPS of $2.51 but misses the current FactSet consensus for 2026 of $2.77.
Rainey said the outlook assumes a “relatively stable” economic environment but also acknowledges there are still uncertainties related to consumer behavior and the political landscape.
Also included in the sales-growth outlook were the negative effects of an extra day of sales last year resulting from the leap year and a strengthening of the U.S. dollar, as well as the positive effect of sales from Vizio, whose acquisition was completed on Feb. 20, 2024.
Jefferies analyst Corey Tarlowe said investors shouldn’t be discouraged by Walmart’s outlook, and he recommended buying the stock on the pullback. He believes management is setting 2025 up to be “a year of beats and raises.”
D.A. Davidson’s Michael Baker reiterated his buy rating on the stock, saying investors shouldn’t worry about the outlook given Walmart’s recent history of basically underpromising so it can overdeliver.
“[Walmart] has a recent track record of beating, then guiding the next quarter low, then beating that, and giving initial full-year guidance that ends up being beatable,” Baker wrote in a note to clients. “Thus, we are not overly concerned with the guidance, and to us, the bottom line is that [Walmart’s] business trends remain strong.”
Still, the stock was the Dow Jones Industrial Average’s
DJIA
-1.01%
biggest decliner on the day.
Earnings for the past quarter beat expectations, and the dividend was raised
In the fiscal fourth quarter to Jan. 31, net sales rose 4% to $178.83 billion, while total revenue, which includes membership and other income, increased 4.1% to $180.55 billion. The FactSet consensus was for net sales of $178.71 billion and for total revenue of $180.19 billion.
Walmart’s U.S. sales grew 5% to $123.5 billion, to beat expectations for $122.95 billion. And comparable-store sales, or sales of stores open at least a year, rose 4.6% to beat expectations for a 4.4% rise.
For Walmart’s membership-based warehouse retailer Sam’s Club, comparable sales increased 6.8%, well above expectations for 5% growth, as the number of transactions rose by 5.4% and the average ticket was up 1.3%.
Net income for the quarter slipped to $5.25 billion, or 65 cents a share, from $5.49 billion, or 68 cents a share, in the same period a year ago.
