Walmart shares fell about 6% in early trading Thursday as the company announced that profit growth would slow this fiscal year, despite rising sales. The retail giant reported a 4% revenue increase during the holiday quarter, with U.S. e-commerce sales soaring 20%. However, its conservative outlook failed to meet Wall Street’s expectations.
Slower Growth Despite Strong Sales
Walmart projected that net sales would grow between 3% and 4% in the upcoming fiscal year, with adjusted operating income rising 3.5% to 5.5% on a constant currency basis. The retailer also acknowledged a 1.5 percentage point impact from its recent acquisition of smart TV brand Vizio and an extra day from leap year in 2024.
For the last fiscal year, Walmart’s adjusted operating income had increased 9.7%, making this year’s forecast a noticeable slowdown. The company also expects full-year adjusted earnings between $2.50 and $2.60 per share, missing analysts’ expectations of $2.76 per share.
Consumer Spending Remains Steady, But Uncertainty Looms
Chief Financial Officer John David Rainey described consumer spending as “steady” and noted, “There’s not any sharp changes that we’ve seen.” However, he acknowledged concerns over tariffs and global instability, saying, “There’s far from certainty in the geopolitical landscape.”
While about two-thirds of Walmart’s products are made or assembled in the U.S., Rainey said potential tariffs on imports from Mexico and Canada could still impact the company. “We’ve lived in a tariff environment for the last seven or eight years, and we’ll do what we know how to do,” he said, adding that Walmart would adjust its supply chain and private-label offerings to offset potential costs.
Quarterly Performance and Financial Metrics
For the fiscal fourth quarter, Walmart outperformed analysts’ expectations in revenue and earnings:
- Earnings per share: 66 cents adjusted vs. 64 cents expected
- Revenue: $180.55 billion vs. $180.01 billion expected
Walmart’s U.S. comparable sales rose 4.6%, and Sam’s Club saw a 6.8% increase. Despite these gains, net income dropped to $5.25 billion, or 65 cents per share, compared to $5.49 billion or 68 cents per share a year ago.
The Retail Landscape and External Factors
As the nation’s largest grocer, Walmart is often viewed as an indicator of consumer health. Investors have been watching U.S. retail trends closely, especially after weaker sales in January. Some analysts attributed the slowdown to weather disruptions, holiday fatigue, and the impact of the Los Angeles wildfires.
Rainey echoed this sentiment, saying, “Cold weather and the wildfires hurt Walmart’s sales.” However, he reassured investors that the downturn was temporary and did not signal a major shift in consumer behavior.
Diversifying Beyond Retail for Higher Margins
Walmart has been expanding beyond traditional retail, following in Amazon’s footsteps by investing in advertising, membership programs, and third-party marketplace services.
- Global membership income increased by 16%, driven by Walmart+ and Sam’s Club.
- Advertising revenue grew 29%, including a 24% rise in Walmart Connect.
- Fulfillment services and third-party marketplace sales also posted double-digit growth.
“These are all higher margin, faster-growing parts of our business where the math is just suggesting that our margins are going up over time,” Rainey explained. “And frankly, I don’t see any end to this.”
E-commerce and Express Delivery on the Rise
Walmart’s efforts to improve online shopping have paid off, with e-commerce sales in the U.S. growing for the 11th consecutive quarter. The company has also found success with express deliveries, which allow customers to receive their orders within hours for an extra fee.
“Over 30% of Walmart customers who have an item delivered from a store have paid an extra fee to have that delivered within a few hours,” Rainey revealed. On Christmas Eve, 77% of orders were express deliveries.
Additionally, Walmart’s pharmacy delivery service, launched in October, has expanded nationwide. “As customers order a prescription for a sick family member or place an order for their regular medication, many are buying other items like groceries,” Walmart U.S. CEO John Furner noted.
Stock Performance and Investor Reaction
Despite the earnings setback, Walmart remains a strong player in the stock market. The company’s shares have climbed 83% over the past year and are up about 15% in 2024, outperforming the S&P 500’s 4% gain.
Walmart also announced a 13% increase in its dividend to 94 cents per share, marking its biggest dividend hike in more than a decade.
While its cautious outlook disappointed investors, Walmart remains confident in its ability to adapt. As Rainey summed up, “We have to acknowledge that we are in an uncertain time and we don’t want to get out over our skis here. There’s a lot of the year to play out.”
Walmart’s latest earnings report highlights the retailer’s ability to grow despite economic uncertainty. While profit growth is expected to slow, strong e-commerce sales, diversification efforts, and operational adjustments position the company for long-term success. Investors will be watching closely as Walmart navigates inflation, tariffs, and shifting consumer behaviors in the months ahead.