Guidance Hobbles Walmart Stock As Quarterly Numbers Beat Expectations
Top retailer expects tough Q1 and full year FY2026 while Trump tariffs trigger uncertainty
Retail bellwether Walmart [WMT] announced strong financial numbers for Q4 ended January 31, 2025, on February 20. But the market saw bloodshed with the stock receding from Wednesday’s close of $104 to $97.21 at Thursday’s close.
Reporting on the sharp market movements, CNN said that Walmart’s warnings on sales and profit for FY2026 triggered the market slide. The heavyweight stock dragged down Dow 1%.
The company has reported Q4 revenue of $180.6 billion, a 4.1% increase from $173.4 billion in the same quarter of the previous year. The company’s gross profit edged up to 23.9% in the reporting quarter from 23.3% a year ago. The retail giant’s earnings per share were $0.66 from $0.6 in the Q4 of the previous year.
However, Walmart’s strong quarterly numbers failed to prevent the market’s volatility because of the guidance of a tough year. Quoting David Silverman, a senior director at Fitch Ratings, CNN expected the “retail choppiness to continue in 2025,” given the drop in consumer sentiment, especially among lower-end consumers.
Expecting headwinds
The Company’s guidance assumes a “stable consumer and continued pressure” from its mix of products and formats globally. The first quarter fiscal 2026 guidance is based on net sales of $159.9 billion, adjusted operating income of $7.1 billion, and adjusted EPS of $0.60.
In the full-year forecast, the company expects 3% to 4% revenue increase, but cautions the stakeholders about the likelihood of some headwinds. The lapping leap year is expected to add 100 bps headwind.
Walmart CEO Doug McMillon’s view that his company’s “momentum driven by our low prices, a growing assortment, and an eCommerce business driven by faster delivery times” was not enough to restore the market’s confidence. “We’ll stay focused on growth, improving operating margins, and strengthening ROI as we invest to serve our customers and members even better,” he said. The impact of frequently changing landscape of Trump tariffs is expected to roil the markets further. Walmart’s outlook “assumes a relatively stable macroeconomic environment” but “acknowledges that there are still uncertainties related to consumer behavior and global economic and geopolitical conditions,” Walmart finance chief John David Rainey said on a call with analysts.
Impact on benchmark indexes
While Walmart’s ability to withstand market pressure is remarkable, the largest U.S. company by revenue has a huge impact on the benchmark indexes.
There are analysts who believe investors must look past the headline miss as Walmart’s underlying trends are strong. “The company has historically been very conservative with initial guidance, and we believe the same is the case this year,” wrote Rupesh Parikh, an analyst at Oppenheimer. “The health of the business remains intact, in our view, with broad-based top line momentum continuing in Q4.”
Business website Barrons cited Brian Mulberry, client portfolio manager at Zacks Investment Management, as saying that the if the company were truly worried about a sharp decline in consumer spending, it would not have approved the largest dividend raise in over a decade. Walmart raised its dividend by 13% to 94 cents per share. “If it were a real concern, then you wouldn’t give up that type of liquidity at your balance sheet,” Mulberry told Zacks.
