Despite strong sales during the holiday shopping season driving Walmart's fourth-quarter revenue and profit to exceed Wall Street expectations, this has not masked market concerns about its future profitability.
According to LSEG data, Walmart expects adjusted earnings per share for the current fiscal year to be between $2.75 and $2.85, a forecast that is significantly below Wall Street's expectation of $2.96. As a result of this guidance, Walmart's stock price fell 1.38% on Thursday, closing at $124.87. Nevertheless, the company's stock price has still risen about 12% year-to-date.
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As a barometer of the U.S. economy, Walmart's executive team revealed a clear divergence in the U.S. consumer market. New CEO John Furner pointed out that while high-income households earning over $100,000 are driving market share growth, households earning less than $50,000 are facing financial difficulties. He candidly stated during a conference call with analysts that this lower-income group is &#34;tightening their wallets&#34; and, in some cases, can only &#34;barely make ends meet.&#34;
This earnings report also marks a turning point in Walmart's history. According to the financial report, Amazon's revenue reached $716.9 billion in the most recent fiscal year, surpassing Walmart's $713.2 billion for the first time, making it the largest company in the world by annual revenue. This highlights the changing competitive landscape in the retail industry and prompts Walmart to accelerate its digital transformation towards e-commerce and advertising.
<h2>Weak Earnings Guidance Raises Concerns</h2>
In the fourth fiscal quarter ending January 31, Walmart performed solidly. The company reported revenue of $190.66 billion, exceeding analysts' expectations of $190.43 billion; adjusted earnings per share were $0.74, slightly above the expected $0.73. Excluding fuel, same-store sales in Walmart's U.S. business grew by 4.6%, while Sam's Club grew by 4%.
However, market focus is on its cautious outlook for the new fiscal year. In addition to the disappointing earnings per share guidance, Walmart expects net sales for the year to grow by 3.5% to 4.5%.
Meanwhile, to reward shareholders, Walmart announced a new $30 billion stock repurchase authorization, replacing the previously approved $20 billion repurchase plan in 2022.
<h2>Intensifying &#34;K-shaped&#34; Consumption Divergence</h2>
Walmart's performance further confirms the &#34;K-shaped economy&#34; trend described by economists, where the consumption capacity of the affluent and low-income groups is polarizing.
CFO John David Rainey stated in an interview with CNBC that while the company gained market share across all income groups, the increase from high-income households was more pronounced. He noted that fashion items achieved mid-single-digit growth in the fourth quarter, with this growth almost entirely coming from households earning over $100,000
In contrast, the consumption pressure on low-income groups is significant. John Furner pointed out that this group is struggling to cope with rising costs of food, housing, and utilities. Executives also mentioned factors such as &#34;recruitment recession,&#34; low consumer confidence, and student loan defaults as reasons for maintaining caution about the future. This aligns with trends from other discount retailers like Dollar Tree, which also indicated that its new customers primarily come from high-income households.
<h2>Strong E-commerce Business and Technological Transformation</h2>
To cope with fierce competition from Amazon, Walmart is heavily investing in its digital business. In the fourth quarter, Walmart's U.S. e-commerce sales grew by 27% year-over-year, while global e-commerce sales increased by 24%. This marks the company's digital business achieving double-digit growth for the 15th consecutive quarter.
Currently, e-commerce accounts for 23% of Walmart's total sales in the U.S., reaching a historic high. This is attributed to a nearly 50% increase in order fulfillment for pickup and delivery from stores, as well as a roughly 41% growth in its advertising business, Walmart Connect.
To strengthen its technological attributes, Walmart moved its stock trading from the New York Stock Exchange to the Nasdaq, which is home to many tech stocks, last December, and its market value surpassed $1 trillion earlier this month. John Furner emphasized that the company is leveraging artificial intelligence to reduce inventory and labor costs, thereby achieving growth at a lower cost.
<h2>Inflation and Tariff Impact Expected to Ease</h2>
Regarding the macroeconomic environment, Walmart executives released relatively optimistic signals. John David Rainey stated in an interview with Bloomberg that inflation driven by tariffs has peaked or is nearing its peak, and price pressures from inflation and the increase in Trump-era tariffs are expected to ease in the coming months.
Rainey noted that Walmart's inflation rate in the U.S. for the fourth quarter was just slightly above 1%, which seems to indicate a &#34;more normalized pricing environment.&#34; He believes that the retail industry has largely absorbed or endured the impact of tariffs. This view sharply contrasts with comments made by Amazon CEO Andy Jassy last month, who warned that tariffs are beginning to &#34;seep into some prices.&#34;

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Walmart's Q4 revenue exceeded expectations, but the profit guidance for the new fiscal year (USD 2.75-2.85 per share) is significantly lower than the market expectation of USD 2.96, indicating ongoing uncertainty in consumer spending under inflationary pressures, leading to a 1.38% drop in stock price. The earnings report confirms the "K-shaped" divergence: high-income households drive growth, while low-income groups are "tightening their wallets." Additionally, Amazon's annual revenue has surpassed Walmart for the first time, changing the retail competitive landscape

- Walmart's robust holiday sales boosted fourth-quarter revenue and profit, surpassing Wall Street expectations, but raised concerns about future profitability.  
- The company forecasted an adjusted EPS of $2.75 to $2.85 for the current fiscal year, below the expected $2.96, leading to a 1.38% stock drop despite a 12% year-to-date rise.  
- Walmart's results highlight a "K-shaped" economy, with high-income families driving significant market share gains while low-income households face financial difficulties amid rising costs.

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Walmart's fourth-quarter earnings report exceeded expectations, but the profit guidance fell short of expectations. The CEO stated, "Low-income families in the U.S. can only barely make ends meet."