As Walmart Inc. (NYSE:WMT) prepares to release its first-quarter earnings this Thursday, the retailer is under scrutiny given its recent stock performance and the broader context of online spending trends. Walmart’s shares have seen a significant 15% rise in 2024, outpacing the S&P 500’s 9% increase, pushing the stock to trade around 25 times expected earnings, a notable increase from its 10-year average valuation of about 20 times, as per London Stock Exchange Group (LSEG) data.
Analysts project Walmart to announce nearly a 6% growth in net income for the quarter ending April 30, with earnings per share anticipated to reach 52 cents, aligning with the higher end of Walmart’s own forecasts. These expectations are set against a backdrop of fierce online price competition, notably from Amazon and PDD Group’s Temu, especially in categories like personal care, clothing, and electronics.
However, concerns linger about Walmart’s inventory management. Despite the company’s assurances in February that its inventory levels were in “great shape,” LSEG data indicates that Walmart’s inventory turnover has lagged behind peers such as Kroger and Costco in their latest fiscal quarters. This discrepancy could potentially elevate costs and impact profit margins, particularly in general merchandise—a sector that generated $114 billion and constituted a quarter of Walmart’s total revenues in the fiscal year ended January 2024.
Consumer spending patterns also suggest caution, with Deloitte highlighting weaker spending intentions on non-essential goods compared to 2021. Nevertheless, Art Hogan, chief market strategist at B. Riley Wealth, remains optimistic about Walmart’s performance. He suggests that if Walmart exceeds revenue and earnings expectations, there could be further room for stock growth, despite the current high valuations. Hogan personally holds Walmart shares, though his firm does not.
The upcoming earnings report will thus be a critical indicator of whether Walmart can sustain its momentum amid these mixed signals and justify its current market valuation.
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