Walmart outlook disappoints Wall Street after strong holiday quarter

Walmart on Tuesday topped holiday-quarter earnings expectations, as the discounter said it drew budget-conscious shoppers searching for food, gifts and household items at a lower price.

But shares slid in premarket trading, after the big-box retailer gave a weaker-than-expected outlook for the year ahead.

The company said it expects same-store sales for Walmart U.S. to rise between 2% and 2.5% excluding fuel, in the fiscal year ahead. That’s below analysts’ expectations for 3% growth, according to StreetAccount. It anticipates adjusted earnings per share to range from $5.90 to $6.05, excluding fuel.

Walmart CFO John David Rainey told CNBC shoppers are still buying fewer discretionary items, as grocery prices remain elevated. He said that factored into Walmart’s predictions for the year ahead.

“The consumer is still very pressured,” he said. “And if you look at economic indicators, balance sheets are running thinner and savings rates are declining relative to previous periods. And so that’s why we take a pretty cautious outlook on the rest of the year.”

Home Depot, which also reported fiscal fourth-quarter earnings on Tuesday morning, also shared a softer outlook. It said it expects same-store sales to be approximately flat in the coming fiscal year.

Here’s what Walmart reported for the fiscal fourth quarter that ended Jan. 31, according to Refinitiv consensus estimates:

• Earnings per share: $1.71, adjusted, vs. $1.51 expected
• Revenue: $164.05 billion vs. $159.72 billion expected

Walmart reported a net income of $6.28 billion, or $2.32, up from $3.56 billion, or $1.28, a year earlier. 

Revenue of $164 billion marked a 7.3% year-over-year increase.

Same-store sales for Walmart U.S. rose 8.3%, excluding fuel. The key industry metric that includes sales from stores and clubs open for at least a year. E-commerce sales jumped by 17% year over year for Walmart U.S.

At Sam’s Club, same-store sales rose 12.2%, excluding fuel.

The company is not only the nation’s largest retailer. It’s also a grocery powerhouse, a factor that has steadied sales and driven foot traffic as Americans watch the budget because of high inflation. 

Walmart’s reputation for value has helped the retailer – as has its large grocery business. It is the largest grocer in the country by revenue. The prices of those groceries has attracted new customers across income levels.

In the holiday quarter, Walmart’s share gains also came from lower- and middle-income shoppers

Walmart has made progress with a headache that has plagued many retailers: A glut of unsold goods that piled up in store backrooms and wound up on clearance racks. Inventory is roughly flat with a year ago, Rainey said, and is down 3% for Walmart U.S.

Shares of Walmart closed on Friday at $146.44, bringing the company’s market cap to nearly $395 billion. The company’s shares are up about 3% so far this year, underperforming the S&P 500’s approximately 6% gain during the same period.