Walmart Outlook Disappoints, Signaling Caution on Shoppers

Walmart Inc. forecast a second straight decline in annual profit, taking a cautious outlook after a performance last year that was marred by an inventory surge.

(Bloomberg) — Walmart Inc. forecast a second straight decline in annual profit, taking a cautious outlook after a performance last year that was marred by an inventory surge. 

Annual adjusted earnings will fall to as little as $5.90 a share, pressured by a 42-cent drag from higher interest expense, taxes and the acquisition of full ownership of a South African retailer and a US automation provider. The outlook also includes a 14-cent hit from last-in, first-out accounting, Walmart said in a statement. Wall Street had estimated earnings of $6.53 a share.

The projection points to a slow rebound from last year’s missteps, when Walmart misjudged a shift in demand away from general merchandise such as apparel and home goods as inflation pinched US consumers. At the same time, the retailer has put last year’s inventory surge in the rear-view mirror and continues to benefit from robust grocery sales and rising market share as shoppers up and down the income scale hunt for bargains amid rising economic uncertainty. 

“We feel good about how the core business is operating, but we’re being cautious with the macroeconomic outlook,” Chief Financial Officer John David Rainey said in an interview. “There’s a lot of unpredictability around what’s happening, what will be the effect of Fed tightening on the consumer balance sheet, what is the effect of the declining savings rate.”

The shares fell 1.2% at 9:51 a.m. in New York. Walmart climbed 3.3% this year through Feb. 17, while the S&P 500 index advanced 6.2%. Walmart outperformed the S&P 500 and major retail indexes last year.

At US Walmart stores, comparable sales excluding fuel will gain no more than 2.5% during the current fiscal year, which ends in early 2024, Bentonville, Arkansas-based Walmart said. That trails the 3.1% average of analyst estimates compiled by Bloomberg. 

In last year’s fiscal fourth quarter, which ended Jan. 31, adjusted earnings came in at $1.71 a share. Analysts had projected $1.52. Sales rose 7.3% to $164 billion, compared with the average estimate of $159.6 billion. 

During the last fiscal year as a whole, adjusted earnings fell to $6.29, the first full-year decline for the profit measure in six years. 

(Updates with additional details in second paragraph, shares in fifth paragraph.)

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