Walmart issues a startling business outlook

Walmart's latest forecast raises questions.

Feb 20, 2025 - 22:52

Walmart issues a startling business outlook

Walmart posted stronger-than-expected fiscal fourth-quarter earnings Thursday, but a muted near-term forecast tied to tariff and inflation risks sent shares in the world's biggest retailer sharply lower in early trading.

Finance chief John Rainey said the tariff impact wasn't explicitly worked into the group's near-term forecast, but said its supply chains and sourcing would allow it to manage potential impacts.

Walmart said adjusted earnings for the three months ending in January came in at 66 cents a share, a 10% increase from the same period last year and just ahead of the Wall Street consensus forecast of 64 cents per share.

Group revenues rose 4.1% to $180.55 billion, Walmart said, narrowly topping analysts' estimates of a $180 billion tally, while U.S. transactions rose 4.3% and overall ticket prices were up 1.8%.

U.S. same-store sales climbed 4.6%, well ahead of Wall Street's 4.1% forecast, while online sales also impressed, rising 16% from a year earlier and now representing more than a fifth of overall revenue.

Walmart's muted near-term outlook has retail shares on the back foot amid concerns about tariff impa cts and a pullback in consumer spending.
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Looking into fiscal 2026 ending next January, Walmart sees adjusted earnings in the region of $2.50 to $2.60 a share, well shy of the LSEG estimate of $2.76. Revenue growth is estimated at 3% to 4%.

"Our team finished the year with another quarter of strong results," said CEO Doug McMillon. "We have momentum driven by our low prices, a growing assortment, and an e-commerce business driven by faster delivery times."

"We’re gaining market share, our top line is healthy, and we’re in great shape with inventory. We’ll stay focused on growth, improving operating margins, and strengthening [return on investment] as we invest to serve our customers and members even better.”

For all of fiscal 2025, Walmart's overall revenue rose 2.1% to $681 billion, with operating income up 8.6% to $2.3 billion.

The group also boosted its annual dividend 13%, to 94 cents a share, the largest increase in more than a decade.

"Walmart has a recent track record of beating, then guiding the next quarter low, then beating that," said D.A. Davidson analyst Michael Baker. "And giving initial full year guidance that ends up being beatable (thus) we are not overly concerned with the guidance, and to us, the bottom line is that Walmart's business trends remain strong."

That said, Consumers are likely bracing for higher prices, and perhaps limited inventories, on the back of President Donald Trump's renewed tariff threats, which include 25% levies on goods from Canada and Mexico as well as 10% duty on imports from China.

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"Business contacts in a number of districts had indicated that firms would attempt to pass on to consumers higher input costs arising from potential tariffs," Federal Reserve officials said, according to minutes of the central bank's January policy meeting.

January retail sales, meanwhile, fell the most in two years, according to Commerce Department data, while February consumer sentiment based on the benchmark University of Michigan survey fell to the lowest level in seven months.

Walmart shares were last marked 5.5% lower in early Thursday trading to change hands at $97.50 each, a move that would still leave the stock up more than 30% over the past six months.