Walmart reports good Q4 earnings . . . but stock drops on forecasts of weaker outlook for 2023

Walmart’s latest financial statement have been released. The company reported strong quarterly U.S. comparable sales, from physical stores and digital channels, rose 8.3% vs the same quarter (Nov '21-Jan 2022) at the tail-end of the pandemic.

Share prices immediately began falling though.
The release, while positive backward-looking was somewhat gloomy in its forward-looking forecasts.

From Yahoo article below

Shares of the world’s largest retailer fell 4.6% to $139.75 in premarket trading, as the company continued to battle price hikes from many of its product suppliers in a high-inflation environment.

Walmart forecast earnings of $5.90 to $6.05 per share for the year through January 2024, compared with analysts’ estimates of $6.50 per share . . .

Inflation-squeezed consumers are increasingly shifting toward buying more food and consumables from general merchandise, which Rainey said he expects to continue this year and be a drag on margins.

This has hit Walmart’s consolidated gross profit rate, which fell 83 basis points in the holiday quarter, primarily due to markdowns and sales of lower-margin products.

From the WSJ article

The country’s largest retailer by revenue said it is gaining market share in grocery, including among higher-income households that are spending cautiously. December was the largest sales-volume month in the retailer’s history, the company said. Sales of nonfood items fell during the quarter, as shoppers prioritized spending on everyday needs.

That ate into profits as it has in recent quarters, as food tends to be less profitable than items such as clothing and toys and Walmart discounted many items to offload inventory.

Permit me to cherry-pick one part of the articles from above

This fits into a narrative I feel is especially pertinent today.

Know that corporate execs are “always” (long-term habit) projecting overly rosy scenarios. They tout the benefits of their own companies. Ford always thinks Ford has the best car for your money and that investing in Ford is a good idea. It is not even considered immoral it is just a hometown pride kind of bias.

Wall analysts have become so overly optimistic they are projecting even rosier scenarios than Walmart execs themselves are projecting. Imagine third party activists declaring in effect “Walmart exces are too anti-Walmart.”

That’s what is going on today. That is going on a lot today.
Maybe it is a borderline criminal thing like it was with bond ratings leading to the mortgage crisis. Maybe Wall St analysts are just high on hopium, young fresh out of college types or whatever.

I don’t know the cause. I know only that it is happening.

It has happened before. It will happen again. “Again” probably means right now.
There is nothing new under the sun.

Nice rebound for WMT in a heavily dropping market today.


This is my primary workhorse
It is 3x inverse to $QQQ
Up more than 6% today (most of which I miss because I wait for the daily trend to develop)

My guess…and I’m just thinking out loud here is because of rising food cost more people who don’t normally shop at Walmart is now shopping at Walmart to save on rising food cost. :wink:

Yes. I think management said that drove more people into the store.
It is good that their earnings are up.

It is also noteworthy sign of the times that the Wall St analysts are more optimistic than the people who actual manage the stores on a daily basis.

Walmart managers:
“This coming year we are gonna make $5.90 to $6.05 per share.”
:point_up: That literally is their official estimate.

Wall St Analysts:
“No you’re not. You’re gonna make 10% more. You’re gonna make $6.50 a share.”
:point_up: That literally is their official estimate

Retail Investors:
“I dunno. All I know is I got money left I’m gonna keep buying.
Besides, didn’t Buffet and Lynch say always buy everything all time no matter what?”

Meanwhile Walmart insiders are selling in a 12-to-1 ratio

Here is part of a CNNBusines story saying exactly that

Growth during the holidays was led by grocery sales, the company said, as shoppers bought essentials instead of gifts. Government inflation data shows that grocery prices have increased 11.3% over the last year, and more shoppers are turning to discount chains like Walmart to save money. Sales were slower for traditional holiday products like toys, electronics and clothing, a sign that some consumers were cautious on discretionary spending.

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