Walmart’s Results Have Been Very, Very Good, But China Could Ruin The Party Real Fast

24/7 Wall St. Key Points:

• Walmart (NYSE: WMT) faces growing downside risk as consumer confidence weakens and inflation exceeds expectations, potentially undercutting its recent bullish momentum.
• Over 80% of Walmart’s inventory is sourced from China, making it highly vulnerable to broad-based tariffs, which could compress margins if price increases can’t be passed to cautious consumers.
• Despite strong recent performance, Walmart stock has yet to price in these emerging risks, creating potential for a meaningful reset if trade tensions escalate.
• If you’re worried about the recent pullback in stocks, it’s time to check with a financial advisor and see if you’re ahead, or behind on your retirement goals. Click here to speak with someone today and see where you stand. Don’t worry, it’s free.

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Transcript:

[00:00:04] Doug McIntyre: Wall Street fell back in love with Walmart.

[00:00:08] Doug McIntyre: For understandable reasons. Their last, why did they ever strong quarters? Strong e-commerce, strong, same store sales, very bright guidance. Now since all that happened, Walmart has now said in the last couple days that they’re starting to see anxiety across their customer base. Yikes. At the same time, we’re seeing consumer confidence plunging, we’re seeing retail sales weak.

[00:00:37] Doug McIntyre: The inflation, when that hit the tape today, it was higher than expected.

[00:00:43] Doug McIntyre: So now if you’re sitting over at Walmart and you’re a Walmart investor, you’ve gotta ask yourself whether the optimism they showed on the earnings call is the same way they feel today. It sounds to me like they don’t, it sounds to me like they’re worried about the fact that the consumers pulling back.

[00:01:02] Doug McIntyre: They’ve also got a problem that people don’t necessarily think about. Over 80% of what sold at all Walmart comes from China. Okay? That’s true. So you get yourself in any real trade war, and you’ve got two possible problems. The Chinese could make it hard for Walmart’s retail operations in China. Okay? Number one.

[00:01:25] Doug McIntyre: Number two, if you start to see tariffs put on Chinese goods, that gets passed through to Walmart and there’s no guarantee if consumer confidence is low, that they can raise their prices to offset their costs, which are driven by tariffs. So, yeah. Yeah. I think my optimism about Walmart, which was very high, up until a week or two ago, it’s starting to erode.

[00:01:52] Doug McIntyre: I think that the stock, could take a hit.

[00:01:59] Lee Jackson: I don’t think there’s any question that. See where the pulse of the country can be felt through that company. And this has been a kind of a quick about face for them. ’cause things were rolling along pretty good. But like you said, I mean, it’s had a gigantic run anyway over the last couple of years.

[00:02:19] Lee Jackson: And despite the fact that they will continue to sell massive amounts of consumer staples, okay. from the grocery store, variety and things of that nature. There’s not any markup there, there’s no margins in Staples.They’re thin and, they’re not gonna make it up there. So they need those other items they sell that are high margin and Yeah.

[00:02:44] Lee Jackson: If they’re tariffed on a lot of those, that could make it, a

[00:02:47] Doug McIntyre: Well, I’m looking at the stock right now, so the stock has not been hit by the tariff news.

[00:02:52] Lee Jackson: Not so far. Yeah.

[00:02:54] Doug McIntyre: So again, what I’m saying is look. If you own Walmart right now, or you’re thinking of buying Walmart, you’ve gotta ask yourself if the stock hasn’t been hit yet.

[00:03:05] Doug McIntyre: If the China tariffs, if all of a sudden President Trump says tomorrow, okay, I wasn’t kidding around with you guys. Okay? We’re increasing the tariffs on everything coming in from China by 10%. Everything is, we’re gonna really punish the Chinese for the way that they’ve handled tariffs on our goods and services.

[00:03:27] Doug McIntyre: look, I can see that stock looking like the car stocks right? Do right now on the auto parts tariffs. I can see the, this stock resetting 10%.

[00:03:36] Lee Jackson: Yep. I think you’re right. I, and there’s a good chance at some point this summer that the whole stock market resets 10% or more. But because you’re right, we could be on the verge of stagflation, but I mean, at least the fourth quarter, GDP numbers look pretty good.

[00:03:53] Lee Jackson: They. Well, the toss-up is what will the first quarter numbers be?

[00:03:57] Doug McIntyre: If you look at consumer confidence and you look at retail sales and

[00:04:02] Doug McIntyre: I’ll leave everything else out of this for the minute.

[00:04:05] Lee Jackson: Yeah, yeah. It doesn’t look great.

[00:04:07] Doug McIntyre: I’ve fallen outta love with Walmart a little.

[00:04:09] Lee Jackson: Well, I’m sure you’ll fall back in love with it at some juncture, and so will I. But we’ll keep our, listeners and viewers, and readers in touch with what the numbers look like.

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