Jamie Spencer
Walmart shares fell 6% in early trading Thursday as the retailer forecasted slower profit growth for the fiscal year despite continued sales momentum. Holiday-quarter revenue increased by 4%, and U.S. e-commerce sales surged 20%, driven by store pickup, home deliveries, and higher spending from affluent customers. However, the outlook failed to meet Wall Street’s expectations.
Financial Performance and Outlook
Walmart expects net sales to grow 3% to 4% and adjusted operating income to increase by 3.5% to 5.5% on a constant currency basis. This includes a 1.5 percentage point headwind from the acquisition of smart TV company Vizio and the impact of a leap year in 2024. For the past fiscal year, Walmart posted 9.7% growth in adjusted operating income on a constant currency basis.
The company forecasts full-year adjusted earnings of $2.50 to $2.60 per share, falling short of the $2.76 per share expected by analysts.
Challenges and Uncertainties
Chief Financial Officer John David Rainey described consumer spending patterns as “steady” but noted “uncertainty in the geopolitical landscape.” Although two-thirds of Walmart’s products are made, grown, or assembled in the U.S., tariffs on imports from Mexico and Canada could impact costs.
Rainey emphasized Walmart’s strategy to manage tariff risks by working with suppliers, expanding private brand offerings, and shifting supply chains to optimize costs.
Q4 Earnings and Sales Highlights
For the fiscal fourth quarter, Walmart reported:
- Earnings per share: 66 cents adjusted vs. 64 cents expected
- Revenue: $180.55 billion vs. $180.01 billion expected
Net income fell to $5.25 billion, or 65 cents per share, compared to $5.49 billion or 68 cents per share a year ago. Adjusted earnings excluded one-time items, including legal costs related to opioids and gains or losses on equity investments.
Growth in E-commerce and Consumer Trends
U.S. e-commerce sales soared 20% year-over-year, marking the 11th consecutive quarter of double-digit growth. Global e-commerce sales rose by 16%. Store visits and transactions in the Walmart U.S. segment increased by 2.8%, while the average ticket grew by 1.8% year-over-year.
Strategic Growth and Diversification
Walmart continues to diversify its revenue streams with new ventures outside traditional retail, including:
- Advertising Business: Grew 29% globally, including a 24% increase in Walmart Connect.
- Third-Party Marketplace: Achieved double-digit growth alongside its fulfillment services segment.
- Global Membership Income: Increased 16% year-over-year, supported by Walmart+ and Sam’s Club memberships.
Faster and more frequent deliveries have enhanced the profitability of Walmart’s e-commerce operations. Over 30% of Walmart customers paid extra for expedited deliveries, with 77% opting for express delivery on Christmas Eve.
Dividend Increase and Stock Performance
Walmart increased its dividend by 13% to 94 cents per share, the largest hike in over a decade. As of Wednesday’s close, Walmart shares are up 83% year-over-year, outperforming the S&P 500’s 4% gain over the same period.
