Walmart, WMT, CEO has said customers are feeling signs of financial stress
For the past two years, high interest rates and persistent inflation have weighed on U.S. consumer spending. Now, President Donald Trump's new tariffs on Chinese goods—along with potential tariffs on imports from India, Mexico, and Canada—have added further uncertainty to the economic outlook.
"We're just one month into the year, so I think it's wise to take a measured approach," Walmart Chief Financial Officer John David Rainey said on a post-earnings call. "We don't want to get ahead of ourselves. There's always some level of unpredictability, but we feel confident in our ability to navigate it."
Despite issuing lower-than-expected guidance, Walmart remains optimistic about U.S. shoppers, whom it sees as "resilient" and focused on value, Rainey said. While the company did not factor potential new tariffs into its projections, he noted that Walmart is well-positioned to manage any added costs, without elaborating on specific strategies.
Other companies, such as Birkenstock and Hasbro, have cited the economic impact of tariffs as a reason for their own cautious forecasts.
Walmart’s competitive pricing helped drive strong holiday quarter sales and record annual revenue, but investors reacted more to its disappointing outlook.
"Walmart’s lower-than-expected guidance is a warning sign that U.S. consumer spending is slowing," said Brian Mulberry, client portfolio manager at Zacks Investment Management, which holds Walmart shares.
"Right now, the labor market remains strong," he added. "But if Walmart’s soft guidance is followed by job losses, it would be a clear signal that economic growth is slowing."
Walmart forecasted adjusted earnings per share for the fiscal year ending January 2026 to be between $2.50 and $2.60, falling short of analysts’ expectations of $2.76, according to LSEG data. The company projected annual sales growth of 3% to 4%, compared to analysts' 4% forecast.
As one of the first major U.S. retailers to provide insight into consumer trends, Walmart's report will be closely watched ahead of Target’s holiday-quarter results on March 4. Wall Street expects Target to post a nearly 1% decline in 2024 sales.
"Walmart is watching closely to see how policy changes in Washington could impact costs and consumer behavior," said Gerald Sparrow, chief investment officer at Sparrow Capital Management, which holds $4 million in Walmart stock.
Walmart’s sales projections account for a 20 basis point drag from the extra day in the 2024 leap year but also include a 20 basis point boost from its recent acquisition of smart-TV maker Vizio.
In January, U.S. retail sales saw their biggest monthly decline in two years, impacted by extreme weather and vehicle shortages. However, Walmart remained strong, with total U.S. comparable sales rising 4.6% in the fourth quarter—beating analysts’ expectations of 4.15%.
Higher-income households, particularly those earning six figures, were key drivers of Walmart's market share growth. Seasonal merchandise, auto products, and home goods were top-performing categories. General merchandise sales increased in the low-single digits, while grocery sales rose in the mid-single digits, boosted in part by increased sales of Walmart’s private-label brands.
The retailer also reported strong demand for GLP-1 weight-loss drugs during the quarter. Overall, transactions (excluding fuel) at Walmart’s more than 4,600 U.S. stores rose 2.8%, while the average ticket price increased by 1.8%.
E-commerce remained a bright spot, with online sales rising 20%. Notably, one-third of Walmart’s digital shoppers opted for delivery in three hours or less.