Walmart reported earnings today and the top line was good with Q4 revenues at $164 billion compared to $159.5 billion expected. The market isn't enthusiastic about that with shares down 1.5%.
A big reason for that is a softer guide going forward, including FY revenues up just 2.5-3.0%; though it looks a bit better in Q1, up 4.5-5.0%. That's a sign that pent-up savings are tapped out and that inflation is biting. In real terms, a 2.5-3.0% rise in spending would be a drop in real spending.
In any case, it isn't Walmart shares we're worried about, it's the global economy and the massive retailer has great insight on what's happening on the ground.
Some relevant comments and details:
- Food inflation has remained more unstable than what we have expected. it's higher than what we thought it would be
- US comp sales up 8.3% y/y in Q4
- International sales up 2.1% y/y in Q4
- International guidance for 2024 FT +6.0% constant currency
- The investment the company is most excited about is "automation"
- “There is a great deal of uncertainty looking out to the balance of the year. There is still pressure on the consumer. As such, our guidance reflects a cautious outlook on the macroeconomic environment.”
- Noted acceleration to its own private brands in the past 90 days (ie consumers trading down)
- We currently expect sales growth to be strongest in the first half of the year then moderate in H2
- We anticipate stubborn inflation in dry grocery and consumables in particular
- Higher-end consumer made up nearly half of the gains we saw in the US in Q4 (trading down?)
Last quarter, WMT also noted that customers were shifting from high-margin items like apparel to low-margin items like food and consumer staples in what was seen as a sign of weakening.
