Why Walmart stock is sliding despite Q4 beat

Walmart reported stronger-than-expected fourth-quarter results on Thursday, but its shares slid after the retailer forecast annual sales and profit below Wall Street expectations.

The world’s largest retailer posted a nearly 6% rise in quarterly sales, with both earnings and revenue topping analysts’ estimates.

Still, the Walmart stock fell more than 3% after the company projected more modest gains for its current fiscal year, even as it unveiled a fresh $30 billion share-repurchase programme.

Subdued outlook weighs on shares

For the current fiscal year, Walmart said it expects net sales to grow between 3.5% and 4.5%, while adjusted earnings per share are forecast to range from $2.75 to $2.85.

That outlook fell short of Wall Street expectations of $2.96 per share, according to LSEG.

DA Davidson analysts, previewing the retailer's 4Q report that they wouldn't be surprised to see the outlook play out in this manner, citing inflated expectations.

However, Walmart has a tendency to beat its original plan, they added.

Walmart has long been known for offering cautious forecasts, a tendency that may have been reinforced by the recent leadership transition.

The CEO, John Furner, said consumer spending in the US remains relatively resilient but more selective, noting that most of the retailer’s market share gains are still coming from households earning over $100,000.

By contrast, he said, spending pressures are more evident among lower-income consumers.

Despite the softer outlook, Walmart’s board approved a new $30 billion share buyback authorisation, replacing a $20 billion programme announced in late 2022.

Under that earlier plan, the company spent $8.1 billion to repurchase 85 million shares in its most recent fiscal year, which ended on Jan. 31.

Holiday-quarter sales beat expectations

Walmart reported net sales of $190.7 billion for the quarter ended Jan. 31, up 5.6% from a year earlier.

The figure edged past analysts’ estimates of $190.5 billion, according to FactSet, as the retailer benefited from steady holiday demand and continued gains in online shopping.

Net income, however, fell 19.4% to $4.2 billion, coming in below analyst expectations and reflecting higher costs and investments across the business.

In the United States, comparable sales from stores and digital channels open for at least 12 months rose 4.6% during the quarter, beating expectations of a 4.2% increase.

Online sales surged 27%, highlighting the growing role of e-commerce and delivery services in Walmart’s growth strategy.

The company said it continued to attract higher-income shoppers, a trend that has helped offset broader consumer pullbacks seen elsewhere in the retail sector.

First report under new leadership

The earnings marked the first report under chief executive Furner, who recently took the helm at a pivotal moment for the industry.

Furner succeeded Doug McMillon and became the retailer’s sixth chief executive in roughly six decades.

"The pace of change in retail is accelerating. It’s exciting. And our financial results show that we’re not only embracing this change, we’re leading it. For our customers and members, the future is fast, convenient, and personalized," Furner said.

Markets have broadly welcomed Furner’s appointment, citing his leadership of Walmart’s US business during the pandemic and his push to adapt ahead of rivals.

Walmart’s US division, now led by David Guggina, generates nearly 70% of the company’s annual revenue.

Signals for the wider retail economy

As one of the first major US retailers to report results from the crucial holiday quarter, Walmart’s performance is being closely watched for clues about consumer behaviour amid higher prices and trade tensions.

US retail sales excluding autos, gasoline, building materials and food services slipped 0.1% in December after a modest rise in November, suggesting some consumers are pulling back under pressure from higher costs, partly linked to tariffs.

Walmart, however, appeared relatively insulated.

Shopper traffic data from Placer.ai showed visits to its 4,600 US stores rose in every month of the quarter, reinforcing the retailer’s position as a beneficiary of cautious but steady consumer spending.