walmart gave a worse-than-expected financial outlook for the year as it released first-quarter results Thursday, raising questions about the health of U.S. consumers as rising gas prices strain shoppers’ budgets.
The retail giant had stood by its 2027 outlook, which disappointed investors when released last quarter. The company said it expects adjusted earnings per share to be between $2.75 and $2.85, below expectations of $2.91, LSEG said. Walmart said it expects net sales to increase 3.5% to 4.5% this year.
Walmart also released its outlook for the current quarter based on expectations. The company expects adjusted earnings per share to be between 72 cents and 74 cents, short of the 75 cents expected. Walmart expects net sales to increase 4% to 5% for the quarter.
Wal-Mart’s weaker-than-expected outlook came as the largest U.S. retailer and its peers posted relatively strong sales in the first quarter.
So far this earnings season, major companies have generally said consumer spending is holding up despite soaring gas prices. But that resiliency comes amid an increase in tax returns, which Target said Wednesday may have driven some of its growth in the first quarter.
Walmart’s chief financial officer, John David Rainey, also said in an interview with CNBC that consumers could feel more nervous as the impact of tax returns wears off in the second quarter.
“I think the increase in tax returns has alleviated some of the pressure from high fuel prices. We’re now in a period where tax refunds are few and far between, so consumers will feel even more pressure from high fuel prices,” Rainey said. “This is something we are watching closely, but that expectation is built into our second-quarter outlook.”
He said Walmart’s second-quarter operating profit outlook is probably the best the retailer has given in a decade and a half, and comes as the retailer faces a $175 million headwind from rising fuel prices.
“If fuel prices stay where they are, we’ll probably see even higher growth in the second quarter, so we’re absorbing those prices and maintaining our guidance. We feel very good about that,” Rainey said.
During Walmart’s fiscal first quarter, the retailer outperformed in sales but underperformed.
Here’s how America’s largest retailer performed for the quarter compared to Wall Street expectations, based on a survey of analysts by LSEG.
Earnings per share: 66 cents adjusted vs. 66 cents expected Earnings: $177.75 billion vs. $174.98 billion expected
The company reported net income of $5.33 billion, or 67 cents per share, for the three months ended April 30, compared with $4.49 billion, or 56 cents per share, in the year-ago period. Excluding one-time items related to restructuring charges and other non-recurring items, Walmart’s adjusted earnings per share were 66 cents.
Revenue was $177.8 billion, an increase of 7% from $163.98 billion in the same period last year.
Walmart’s results and annual outlook come amid questions about how rising prices are impacting customers’ wallets.
In the three months since Walmart last reported earnings, new conflicts have erupted in the Middle East, gas prices have soared and consumer sentiment has plummeted, hitting a record low in May. On top of years of inflation, rising interest rates, and global trade wars pushing prices even higher, the bad news continues.
Walmart has long been one of the companies best positioned to weather any economic storm. Walmart has long valued value among lower-income shoppers, but in recent years it has attracted more high-income consumers, helping the company grow and protect it from economic shocks that hit lower-income shoppers harder.
Walmart’s demand remained strong during the quarter as more shoppers sought value. Global e-commerce sales, the company’s key growth areas, increased 26% and global advertising business increased 37%. Both of these high-margin revenue streams could help Walmart keep prices low in the face of rising costs.
