Walmart outlook suffers from high gas prices

Walmart issued a worse-than-expected financial outlook on Thursday as it reported fiscal first-quarter results, indicating the health of the U.S. consumer is being strained by high gas prices.

The mega retailer stood by its fiscal 2027 outlook, which disappointed investors last quarter when it was issued.

The retailer said it’s expecting adjusted earnings per share to be between $2.75 and $2.85, lower than expectations of $2.91, according to the report.

Walmart said it anticipates net sales will rise between 3.5% and 4.5% for the year.

Walmart’s weaker-than-expected outlook comes as the largest U.S. retailer and its peers post relatively strong sales for the first quarter.

The company’s revenue rose 7% in the first quarter, beating estimates, and same-store sales climbed 4.1%, in line with expectations, as the value player continues to see gains in its e-commerce business and with higher-income shoppers.

So far this earnings season, other major companies have also said consumer spending has held up in the face of higher gas prices and growing worries about the state of the economy.

But that resilience also came amid higher tax returns, which Target said on Wednesday may have fueled some of the growth it saw during the first quarter.

In an interview, Walmart finance chief John David Rainey also said consumers may feel more strain as the effect of tax returns goes away in the second quarter.

He said that Walmart’s fiscal second-quarter guidance for operating income is the best the retailer’s given in maybe a decade and a half, and came as the company saw a $175 million headwind from higher fuel prices.

During Walmart’s fiscal first quarter, the retailer beat on the top line but issued in line results on the bottom.

It was just the third time in 16 quarters that Walmart did not beat quarterly earnings expectations.

Walmart shares slid about 2% in premarket trading.

The company’s reported net income for the three-month period that ended April 30 was $5.33 billion, or 67 cents per share, compared with $4.49 billion, or 56 cents per share, a year earlier.

Excluding one-time items related to business reorganization charges and other nonrecurring items, Walmart posted adjusted earnings per share of 66 cents.

Sales rose to $177.8 billion, up 7% from $163.98 billion a year earlier.

Walmart’s results and annual outlook come as higher prices are impacting customer wallets.

In the three months since Walmart last reported earnings, there’s a new conflict in the Middle East, gas prices have soared and consumer sentiment has plummeted, falling to a fresh record low in May.

The flurry of bad news comes on top of years of sticky inflation, higher interest rates and a global trade war that’s pushed prices even higher.

Walmart is among the best positioned to weather just about any economic storm.

Long a value play among lower-income shoppers, Walmart in recent years has been winning over more high-income consumers, which has helped fuel its growth and insulate it from economic shocks that have hit lower earners more acutely.

Demand at Walmart remained strong as more shoppers hunted for logistics providers and value.

Global e-commerce sales, a key growth area for the company, climbed 26%, while its global advertising business jumped 37%.

Both of those high-margin revenue streams can help Walmart keep prices low in the face of rising costs.

According to the outlet, the surge in gas prices has affected consumer spending across the country.

Walmart’s ability to adapt to changing consumer behavior will be crucial in the coming months.

For now, the company remains focused on providing value to its customers, despite the challenges posed by high gas prices.

As the economy continues to evolve, Walmart’s performance will be closely watched by investors and analysts alike.

Walmart’s Financial Performance

The company’s financial performance has been impacted by various factors, including higher fuel prices and changing consumer behavior.

Despite these challenges, Walmart has continued to invest in its e-commerce business and expand its services to meet the evolving needs of its customers.

Global e-commerce sales climbed 26% during the quarter, while its global advertising business jumped 37%.

These high-margin revenue streams have helped Walmart maintain its profitability, despite the headwinds posed by higher fuel prices.

Key Highlights

Walmart’s revenue rose 7% in the first quarter, beating estimates.
Same-store sales climbed 4.1%, in line with expectations.
Global e-commerce sales climbed 26% during the quarter.
Global advertising business jumped 37% during the quarter.

Walmart’s financial performance has been a subject of interest for investors and analysts, who are closely watching the company’s ability to navigate economic uncertainty.

The company’s long-term strategy and commitment to its customers will be essential in driving its growth and profitability.

For more information on Walmart’s financial performance, visit the company’s SEC filings.