Walmart (WMT) Q1 2023 earnings

Workers move shopping carts outside a Walmart store in Lakewood, California, U.S., on Sunday, May 15, 2022.

Bing Guan | Bloomberg | beautiful pictures

Walmart will report earnings on Tuesday before the bell rings, as investors and economists look for clues about how U.S. consumers are suffering from inflation — and whether they’ve started to cut spending.

Here’s what Wall Street expects for the company’s fiscal first quarter, according to Refinitiv consensus estimates:

  • Earnings per share: $1.48 expected
  • Revenue: $138.94 billion expected

As the nation’s largest retailer, Walmart’s sales may reflect broader economic trends and consumer sentiment. For example, when Americans received their first doses of the Covid-19 vaccine a year ago, the big box retailer said saw sales of personal care, celebration, and travel-related items skyrocket, including teeth whiteners and new clothes. Now, industry watchers will be scouring for signs of shoppers switching to cheaper brands or smaller bundles, or skipping discretionary items like clothing and electronics.

Walmart’s earnings report coincides with another much-watched metric. The government will report April retail sales on Tuesday morning. Steph Wissink, retail analyst at Jefferies, said the new data points will provide the market with a “gauge”.

“Walmart reaches a lot of American consumers,” she said. “It also has a very strong impact on the segments of consumers that tend to be the most sensitive.”

Inflationary remains at a nearly four-decade high. The Consumer price indexAccording to the Bureau of Labor Statistics, a broad measure of the prices of goods and services, rose 8.3% in April from a year ago.

Grocery, Walmart’s top selling category, was one of the hardest hit. Food costs rose 9.4% in April on a 12-month basis, according to unadjusted data from the BLS.

According to AAA, gas costs have also spiked to a national average of $4,483 per gallon on Monday — with prices even higher on the West Coast and Northeast. Pump prices began to increase significantly in March when Russia waged war in Ukraine.

JP Morgan retail analyst Chris Horvers said inflation is expected to lead to higher sales for Walmart as shoppers turn to the retailer because of its reputation for value. In the long run, however, the discount company faces risks if lower-income households buy only necessities, or if profits must be collected to keep prices low, he said.

“Walmart is at a point where they are gaining market share,” he said. “If the environment continues as it is, you’re going to have to see Walmart start to invest in pricing and at the same time, you can have – for [income] funnel – loss around more arbitrary categories as well as some consumers converting from Walmart to dollar store channel. “

Shares of Walmart closed Monday at $148.21. Shares are up about 2.5% so far this year, outperforming the broader market as investors seek out consumer staples amid economic uncertainty. The company’s market capitalization is close to $408 billion.

This story is evolving. Please check back for updates.

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