Walmart outlook worries investors in "uncertain time"
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Walmart's strong performance continued in its most recent quarter, but its forecast for the rest of the year — lower-than-expected profit and slowing sales growth — took a toll on a jittery market.
Why it matters: As the world's largest retailer, Walmart is a reliable proxy for the health of the consumer economy.
The retailer projected adjusted earnings of $2.50 to $2.60 per share for its fiscal year, trailing consensus estimates of $2.78, according to Bank of America.
- It sees net sales growing 3% to 4%, slower than the 5% pace from last year.
- CFO John Rainey on an earnings call Thursday cited "uncertainties" tied to consumer behavior and macro forces as factors impacting its guidance.
The impact: Walmart shares closed down 6.5% today, contributing to slides of 0.4% in the S&P 500 and 1% in the Dow Jones Industrial indexes.
Reality check: Walmart is known for providing cautious forecasts — and several analysts said they think that's what's happening here.
- The outlook "seems conservative," TD Cowen's Oliver Chen wrote in a research note.
- "We see upside to the outlook, particularly given improving e-commerce unit economics, automation initiatives, and robust growth of higher-margin revenue streams like advertising, memberships, fulfillment services, and data analytics," CFRA Research analyst Arun Sundaram wrote in a research note.
Indeed, the company's recently completed fourth quarter provided a lot to like for investors. Its U.S. comp sales rose 4.6%, while global e-commerce sales increased 16% and ad revenue jumped 29%.
- "Higher income customers continue to lead share gains for the company," Walmart said in a statement.
- Zoom out: Walmart U.S. CEO John Furner says the company views inflation as having "normalized" despite "some anomalies like what we're seeing right now with eggs."
- CEO Doug McMillon said the company is prepared to manage the impact of tariffs imposed by the Trump administration: "We can't predict what will happen in the future, but we can manage it really well."
The bottom line: Walmart's performance might be cooling off, but the company remains in a strong position.
