Walmart’s strong competitive pricing has continued to attract shoppers struggling with inflation, leading to record sales and profits for the company last year. However, uncertainties in the US consumer spending landscape and potential tariff impacts have cast a shadow over Walmart’s outlook for 2025.
Despite thriving in the stubborn inflation environment, Walmart’s financial prospects have sent ripples through the entire retail industry. The company’s projected earnings per share for the upcoming year fell 27 cents below analyst expectations, causing its stock price to plummet over 6% during midday trading.
The dim sales outlook for the company may reflect future challenges as consumers potentially cut back on spending, with President Trump’s tariffs on China and other countries posing a threat to Walmart’s key success factor – its low-price model.
In an interview with the Associated Press on Thursday, Walmart’s Chief Financial Officer John David Rainey noted that shoppers have remained cautious but resilient, and tariff impacts have not yet significantly altered consumer behavior.
However, Rainey acknowledged more uncertainties ahead, reflected in Walmart’s cautious guidance.
Regarding the prospects of new tariffs, Rainey stated, “We’ve just got a lot of things we don’t know about yet this year.”
While Walmart has not factored tariffs into its financial outlook, Rainey admitted the company is not immune to their effects.
“We will work really hard to provide low prices for our members and customers,” Rainey said.
He mentioned that this entails being flexible in sourcing, such as seeking new supply channels for items like microwaves with increased tariffs on aluminum and steel. Some products may see price hikes as a result.
Rainey pointed out that the tariff issues highlighted in the media have increased people’s concerns and further reduced shopping among Walmart’s Mexico business clientele.
Walmart has established hedging measures against certain tariff threats. Two-thirds of Walmart’s goods are sourced from the US, with the majority being groceries accounting for about 60% of Walmart’s US business.
Nevertheless, Walmart’s stock price has still taken a hit, with declines also seen in other major retailers’ stock prices.
Walmart is among the first major US retailers to report financial performance, reflecting shifts in American shoppers’ sentiment. Over the past year, Americans have become more focused on essential goods rather than large TVs, furniture, or appliances, as the cost of credit and groceries rises, making them more budget-conscious.
It is in this environment that Walmart has flourished, gaining more market share through new marketing strategies, especially among households with incomes over $100,000. Walmart’s online offerings and membership program “Walmart+” have also attracted wealthier customers.
CEO Doug McMillon stated, “Our momentum comes from our low prices, expanding assortment, and e-commerce driven by faster delivery times; our market share is growing, our revenue is good, and our inventory position is strong.”
However, Walmart may still face challenges as the economic risks of new tariffs may be larger than in Trump’s first term. Economists suggest that if Americans are hit by another wave of price hikes and 70% of the US economy is consumer-driven, widespread spending cutbacks will impact Walmart’s sales.
Additionally, natural factors come into play. Government data last week indicated a significant drop in retail sales in January as colder weather kept more Americans indoors, surpassing economists’ expectations and marking the largest decline in a year.
For the quarter ending on January 31, Walmart reported a profit of $5.25 billion, or 65 cents per share. This compares to a year-over-year profit of $5.49 billion, or 68 cents per share. Adjusted earnings per share in the latest quarter were 66 cents. Quarterly revenue reached $180.55 billion, a 4.1% increase.
According to FactSet data, analysts had expected earnings per share of 65 cents and revenue of $180.07 billion.
In terms of Walmart’s US segment, comparable sales (including online sales and in-store sales from the last 12 months) increased by 4.6%, slightly down from the previous quarter’s 5.3%. Walmart’s comparable sales in the second quarter in the US jumped 4.2%, while the first quarter saw a 3.8% rise.
Global e-commerce sales in the latest quarter grew by 16%, which is significantly lower than the 27% growth seen in the third quarter.
Walmart anticipates earnings per share for the first quarter to range between 57 and 58 cents, well below Wall Street’s expected 64 cents. For the full year, Walmart forecasts earnings per share in the range of $2.50 to $2.60. This also falls short of analysts’ forecast of $2.77 per share.
The company projects sales growth for the quarter to be between 3% and 4%, equivalent to a range of $166.35 billion to $167.97 billion. This is slightly lower than analysts’ expected sales of $167.05 billion.
Walmart foresees full-year sales growth in the range of 3% to 4%, totaling between $667.57 billion and $674.05 billion. This falls short of Wall Street’s forecast of $708.72 billion.
(Adapted from Associated Press reports)