Walmart Stock Drops on Conservative Outlook 📉

Walmart shares fell over 6% after the retail giant issued lower-than-expected profit guidance for fiscal year 2026, despite posting better-than-expected fourth-quarter results. This development highlights the complex balance between the company's strong market position and broader economic uncertainties.

Key Points:

• Full-year adjusted EPS forecast of $2.50-$2.60, below $2.77 analyst estimates
• Net sales growth projected at 3-4%, down from previous year's 5%
• Q4 comparable sales exceeded expectations, up 4.6% in US stores
• E-commerce sales grew 20%, surpassing 17.9% estimate
• Annual dividend increased by 13% to $0.94 per share

Financial Performance 

The world's largest retailer demonstrated robust fourth-quarter performance, with total US comparable sales excluding gas rising 4.9%, beating analyst expectations of 4.66%. Sam's Club showed particularly strong results with comparable sales growth of 6.8%, significantly above the estimated 4.99%. E-commerce continued its strong momentum, with US online sales growing 20% and Sam's Club e-commerce sales surging 24%.

Conservative Outlook 

For fiscal year 2026, Walmart provided what analysts describe as characteristically conservative guidance. The company expects adjusted operating income growth of 3.5% to 5.5% in constant currency, including a 150 basis point headwind from the VIZIO Holding acquisition and leap year impact. First-quarter guidance also came in below expectations, with adjusted EPS projected at $0.57-$0.58.

Consumer Trends 

Walmart continues to benefit from shifting consumer behaviors, particularly noting growth in market share among households earning over $100,000 annually. The company reported steady consumer behavior with improved general merchandise sales and holiday demand meeting expectations. Food inflation remained in the low single digits, while general merchandise prices decreased.

Analyst Perspectives 

Wall Street analysts largely remain optimistic despite the stock decline. Truist Securities recommends "aggressive" buying on the pullback, while Bernstein maintains a constructive view on Walmart's potential to continue gaining market share. RBC Capital Markets views the annual outlook as "appropriately prudent" and expects Walmart to remain a market share gainer.

External Factors 

The company faces various uncertainties, including potential tariff impacts on imports from Mexico and China. CFO John David Rainey noted that the guidance doesn't include potential tariff effects, but emphasized the company's ability to work with suppliers and leverage private brands to maintain low prices. Weather events, including fires in Southern California and winter freezes, may have impacted January retail sales across the sector.

Walmart (D1 Interval)

The stock price is approaching a retest of the 50-day SMA at $95.66. Bears will aim to push the price toward the 100-day SMA, while bulls will look for support at the 50-day SMA and a potential reversal.