retail earnings

Retail stocks are trading lower in early US price action today as both Walmart and Home Depot provided tepid guidance. While the January retail sales data surpassed estimates, these companies are circumspect about the outlook for the current quarter.

Walmart reported revenues of $164.05 billion in the fiscal fourth quarter of 2023, a YoY rise of 7.3%. Wall Street analysts were expecting America’s largest retail chain to post revenues of $159.72 billion in the quarter. The company’s US comp sales rose an impressive 8.3% in the quarter.

Walmart’s adjusted EPS of $1.71 was also ahead of the $1.51 that analysts were expecting. Despite better-than-expected revenues and profits, the retail giant is trading lower today as its guidance fell short of estimates.

Walmart guided for EPS of $5.90-$6.05 in the fiscal year 2024 which fell short of the $6.50 that analysts were expecting. It expects sales to rise between 2.5%-3% in the year on a constant currency basis. The company is also quite circumspect about the economy this year.

Speaking with Reuters, Walmart’s CFO John David Rainey said, There’s still a lot of trepidation and uncertainty with the economic outlook. Balance sheets are continuing to get thinner, savings rate is roughly half of what it was at a pre-pandemic level and we’ve not been in a situation like this where the Fed is raising at the rate that it does.”

Walmart and Home Depot Provide Tepid Guidance

Home Depot, another bellwether of the US retail sector also reported its earnings today. The company posted revenues of $35.83 billion in the quarter which fell short of the $35.97 billion that analysts were expecting. The company’s sales rose only about 0.3% YoY in the quarter.

Also, it was the first time since the COVID-19 pandemic that the company’s revenues fell short of estimates. Home Depot saw a surge in revenues during the pandemic. However, its growth rates have since some down as consumers are spending on other goods and services.

The leading home improvement retail company also provided a tepid outlook for the current fiscal year. Its CFO Richard McPhail said, “So we work from kind of a fundamental assumption that consumer spending will be flat. We know that our market has seen a gradual shift that reflects the broader shift in the economy, in consumer spending from goods to services.”

Retail Stocks Trade Lower Today

After disappointing guidance from both Walmart and Home Depot, other retail stocks are also trading lower today. Notably, we’ll get retail earnings in the next week also and Lowe’s and Best Buy would release their earnings.

Along with retail earnings, Fed’s January meeting minutes would also drive markets this week. We’ll also get the January PCE (personal consumption expenditure) data, which is the Fed’s preferred inflation gauge.

The Fed has been raising rates to tame inflation. While high inflation is invariably a negative for stocks, some investment strategies can outperform in periods of high inflation.

Meanwhile, Amazon stock is also trading lower today after tepid retail earnings. Amazon stock slumped after its Q4 2022 earnings release. Several analysts lowered their target price on the stock but overall, Wall Street is overwhelmingly bullish on the stock. We have a guide on how beginners can buy Amazon stock.

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