Walmart issued a worse-than-expected financial statement Thursday as it reported first-quarter fiscal results, raising questions about the health of the US consumer as higher gasoline prices squeeze consumer budgets.
The retailer stood by its 2027 financial outlook, which disappointed investors last quarter when it was released. The retailer said it expects adjusted earnings per share to be between $2.75 and $2.85, lower than expectations of $2.91, according to LSEG. Walmart said it expects total sales to increase between 3.5% and 4.5% annually.
Walmart also released its outlook for its current quarter, which came in as expected, too. It expects adjusted earnings per share to be between 72 cents and 74 cents, short of expectations of 75 cents. Walmart expects total sales to increase 4% to 5% in the quarter.
The retailer’s shares were down about 7% in morning trading.
Walmart’s weaker-than-expected outlook comes as the largest US retailer and its peers posted strong sales in the first quarter. The company’s revenue rose 7% in the first quarter, beating estimates, and same-store sales rose 4.1%, in line with expectations, as the value player continues to see gains in its e-commerce business and high-income consumers.
So far this lead-time, some major companies are also saying that consumer spending has stalled in light of rising fuel prices and growing concerns about the state of the economy. But that strength also came amid higher taxes, which Target said Wednesday may have fueled the growth it saw in the first quarter.
In an interview with CNBC, Walmart chief financial officer John David Rainey also said that consumers may feel more pressured as the impact of the tax ends in the second quarter.
“I think the release of the higher tax has calmed some of the pressure related to the increase in the price of fuel and since we are in the current period where those tax refunds are not coming in, I think consumers will feel a lot of pressure because of the increase in the price of fuel,” said Rainey. “It’s something we’re keeping an eye on, but that expectation is built into our guidance for the second quarter.”
He said Walmart’s second-quarter fiscal guidance for operating income was the best the retailer has given in perhaps a decade and a half, and came as the company saw a $175 million headwind from higher fuel prices.
“It’s probably going to be bigger than that in the second quarter if gasoline prices stay where they are, so we’re accepting those prices and we’re still maintaining our guidance, and I feel pretty good about that,” Rainey said.
During Walmart’s first fiscal quarter, the retailer beat the top line but delivered bottom line results. It was the third time in 16 quarters that Walmart did not beat expectations for the quarter.
Here’s how America’s biggest retailer performed during the quarter compared to Wall Street’s expectations, based on a survey of analysts by LSEG:
- Earnings per share: 66 cents adjusted versus 66 cents expected
- Net worth: $177.75 billion vs. $174.98 billion expected
The company’s reported net income for the three months ended April 30 was $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 related to business restructuring costs and other non-recurring items, Walmart posted adjusted earnings per share of 66 cents.
Sales rose to $177.8 billion, up 7% from $163.98 billion last year.
Walmart’s results and annual outlook come as questions swirl about how higher prices are impacting customers’ wallets.
In the three months since Walmart last reported earnings, there has been renewed conflict in the Middle East, fuel prices have risen and consumer sentiment has weakened, falling to a new record low in May. The slew of bad news comes on top of years of sticky inflation, high interest rates and a global trade war that is driving prices even higher.
Walmart is among the places best positioned to weather almost any economic storm. A long-time player among low-income shoppers, Walmart in recent years has been winning over many high-income shoppers, which has helped boost its growth and protect it from the economic shocks that hit the lowest-income earners.
During the quarter, demand at Walmart remained strong as more shoppers hunted for value. Global e-commerce sales, a key growth area for the company, rose 26%, while its global advertising business jumped 37%. Both of those high-margin revenue streams could help Walmart keep prices low in the face of rising costs.
