A Cautious Forecast Hits Shares
Walmart shares fell about 8% on Thursday after the retailer issued a weaker-than-expected financial outlook, raising fresh questions about the health of U.S. consumers as high gas prices continue to strain household budgets.
The company stood by its fiscal 2027 guidance, which had already disappointed investors when it was first issued last quarter. Walmart expects adjusted earnings per share of between $2.75 and $2.85, below the $2.91 analysts had expected, according to LSEG.
Second-Quarter Guidance Also Falls Short
Walmart also issued a cautious outlook for the current quarter. The retailer expects adjusted earnings per share of between 72 cents and 74 cents, below Wall Street expectations of 75 cents.
Net sales are expected to rise between 4% and 5% in the quarter. For the full year, Walmart continues to expect net sales growth of 3.5% to 4.5%, suggesting that revenue momentum remains solid even as profit expectations come under pressure.
First-Quarter Sales Remain Strong
The weaker forecast came despite a strong first-quarter revenue performance. Walmart posted revenue of $177.75 billion, ahead of the $174.98 billion expected by analysts.
Revenue rose 7% from $163.98 billion a year earlier. Same-store sales climbed 4.1%, in line with expectations, as Walmart continued to benefit from its value positioning, e-commerce growth and stronger demand from higher-income shoppers.
Earnings Meet Expectations
Adjusted earnings per share came in at 66 cents, matching analyst expectations. It was only the third time in 16 quarters that Walmart did not beat quarterly earnings forecasts.
Reported net income for the three-month period ended April 30 reached $5.33 billion, or 67 cents per share, compared with $4.49 billion, or 56 cents per share, a year earlier. Excluding one-time items, Walmart posted adjusted earnings per share of 66 cents.
Gas Prices Pressure Lower-Income Shoppers
Chief financial officer John David Rainey said higher tax refunds helped soften some of the pressure from rising fuel prices in the first quarter. But as those refunds fade in the second quarter, consumers may feel more strain.
Rainey said Walmart is closely watching how spending patterns differ between high-income, middle-income and lower-income customers. He noted that the gap between high-income and low-income shoppers has continued to widen over recent quarters.
Signs Of Consumer Stress Appear
One sign of pressure is appearing at Walmart’s fuel stations. Rainey said the average number of gallons customers fill per visit has fallen below 10 for the first time since 2022, calling it an indication of stress.
He said higher-income customers continue spending with confidence across many categories, while lower-income consumers are more budget conscious and may be facing financial distress.
Value Positioning Helps Walmart Gain Share
Walmart’s cautious guidance reflects worries about consumer confidence, but the company is also gaining market share as inflation-weary shoppers search for value.
During the quarter, Walmart recorded its strongest transaction growth in six quarters and its best fashion share growth in five years. Rainey said tax refunds likely helped general merchandise sales, but also credited the company’s execution and appeal to new shoppers.
E-Commerce And Advertising Support Growth
Walmart’s alternative revenue streams continued to perform strongly. Global e-commerce sales rose 26%, while sales on its U.S. marketplace climbed nearly 50% during the quarter.
The company’s global advertising business jumped 37%. These higher-margin businesses give Walmart more flexibility to absorb rising costs, keep prices low and defend its position as consumers become more selective with spending.
