Why Walmart stock is plunging after earnings
Walmart is seeing higher sales thanks to wealthier customers shopping online, but what has investors selling the stock?
Transcript:
CONWAY GITTENS: Walmart (WMT) is sounding a cautious tone on the U.S. consumer - and that is sending shivers throughout the retail sector. The world’s largest retailer issued a fiscal-year profit forecast that came in below expectations. The company’s sales growth outlook came in at the low end of forecasts as well. The outlook suggests Walmart is expecting a consumer pullback later this year as inflation remains relatively high with consumer lending rates not likely to fall much further.
The key Walmart consumer is already under pressure as high food bills, rising gasoline prices, and everyday living costs, such as rent, eat away at their budgets. And now there’s a threat prices could go even higher with broad-based tariffs threatened on all imports. Even higher-income shoppers have been flocking to Walmart for refuge. The retailer said it continues to see more six-figure shoppers come through the doors, which is helping to offset any weakness coming from lower-to-middle income consumers.
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That’s a winning formula - at least for the quarter just reported. Walmart says the average in-store bill at check-out for the fourth quarter, which includes the holiday shopping season, rose 2 percent. Online sales in the U.S. jumped 20 percent during the same period. Companywide, sales came in better than expected at nearly $181 billion. That’s a jump of more than 4 percent from a year ago - but as Walmart’s forecast suggests, the retailer isn’t sure it will see numbers like those in the near future.
Turning to markets now on this Thursday, the Walmart news is weighing on retail stocks, and that is putting pressure on the broader market. Investors are also digesting the latest economic news. Weekly jobless claims rose more than expected last week but remain in a tight range, which suggests the labor market remains stuck in neutral.
That’ll do it for your Daily Briefing. From the New York Stock Exchange, I’m Conway Gittens with TheStreet.
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