Muted holiday sales reduces Walmart’s earnings expectations

Equity market watchers expect lower quarterly earnings from Walmart when the retailer reports fiscal fourth quarter and full-year financials on Friday (Feb. 17). Lukewarm holiday sales are part of why net income expectations have been reduced.

Walmart is expected to post net income of $1.51 per share for the quarter that ended Jan. 31. That would equate to net income of $4.1 billion, down 2.14% from a year ago. Revenue for the fourth quarter is forecast at $159.55 billion, up 4.4% year over year.

The average consensus for full-year earnings is around $6 per share for a total of roughly $16 billion before any one-time charges. Annual net income is expected to decline nearly 8% year over year. Analysts also forecast top line revenue growth of 5.9% to $606.34 billion for fiscal 2023, ending Jan. 31.

Walmart U.S. is expected to report quarterly revenue of $109 billion, up 3.5% from a year ago. Fiscal 2023 revenue is forecast at a record $411.2 billion, up 4.6% from a year ago. Comp sales are forecast at 6% for the quarter, led by strong traffic and grocery sales that helped offset milder discretionary spending trends.

Sam’s Club is expected to report fourth-quarter revenue of $21.4 billion, up 11.2% from a year ago. For the full year, Sam’s is expected to report revenue of $84.1 billion, up 14.5%, led partly by membership growth for the full year. Comp sales are forecast to grow 7% for the quarter and 9% for the year.

Walmart’s international sector is expected to see mixed results, with growth limited in China amid the long government shutdown from COVID, and better results in Latin America. International sales are forecast at $27.38 billion for the quarter, up 1.4% compared to a year ago. Annual revenue is forecast at $100.2 billion, roughly flat compared to the prior year.

Oppenheimer analysts noted on Feb. 13 that there will be a weakness in margins, but Walmart is positioned to grow share so the firm reiterated its “buy” rating with a price target of $160. Gordon Haskett analyst Chuck Grom upgraded Walmart to “accumulate” from “hold” with a price target of $155, up from $145. The firm said Walmart’s price leadership positions it well to gain market share in a softer macro environment.

“We expect Walmart to see benefits from continued sales tailwinds and improving margin flow through as peak cost pressures ease. The company has a host of high-margin ancillary initiatives that provide added financial flexibility,” Grom noted.

Simeon Gutman, a retail analyst with Morgan Stanley, recently raised his price target for Walmart to $161 after citing improving inflationary pressures and continued strong traffic in stores and clubs. Gutman also rates the shares a “buy.” Ivan Feinseth, an analyst with Tigress Financial, also recently updated his recommendation for Walmart shares from “neutral” to “buy” with an aggressive price target of $176.

“Walmart continues to expand in all directions to meet the ever-changing retail environment and when combined with its higher-margin flywheel growth businesses will drive further shareholder value creation,” he noted.

Feinseth sees further upside in owning Walmart shares, saying the dividend growth and share repurchases help bolster the overall value proposition.

Shares of Walmart Inc. (NYSE: WMT) closed Monday at $145.91, up 2.19% on light volume. Over the past 52 weeks, Walmart shares have traded between $117.27  and $160.77.