Soft Guidance Dampens Walmart's Stock Performance

Walmart Inc. CEO Doug McMillon anticipates the emergence of a deflationary trend in the United States in the upcoming months, a development he views favorably for consumers. During a conference call discussing the company's third-quarter results, McMillon expressed satisfaction with this trend, emphasizing Walmart's commitment to providing lower prices to its customers. However, he acknowledged that it is too early to determine the extent of the deflationary impact.

‍

Earlier in the week, Cathie Wood, CEO of ARK Invest, also suggested the onset of a deflationary trend in the U.S., speculating that it might lead the Federal Reserve to consider reducing its key interest rate.

‍

Walmart Inc.'s stock experienced a 7% decline on Thursday following the company's 2023 guidance, which fell below consensus expectations, despite reporting profits and sales that surpassed third-quarter projections. This marked the largest single-day drop in the stock since July 26, 2022.

‍

McMillon acknowledged concerns about pricing levels in several food categories in the U.S., posing challenges for consumers. However, he noted a decline in prices for general merchandise, positioning Walmart well for the holiday season.

‍

While Walmart faced softness in late October, as mentioned in the conference call, analysts suggest that the October slowdown was offset by a strong start to November, particularly in the apparel category. Some analysts expressed optimism about Walmart's performance during the holiday season, with expectations of share gains.

‍

Walmart reported net income of $453 million, or 17 cents a share, for the quarter, a significant improvement from the $1.8 billion loss, or 66 cents a share, in the same period the previous year. Adjusted earnings per share exceeded the FactSet consensus at $1.53.

‍

The company's revenue increased by 5.2% to $160.8 billion, surpassing the FactSet consensus of $159.7 billion. Walmart's U.S. same-store sales rose by 4.9%, and e-commerce sales saw a notable increase of 24%. The company also highlighted growth in international sales, led by Walmex and China.

‍

Walmart's strong performance prompted an upward revision of its full-year guidance, with adjusted EPS expected to be between $6.40 and $6.48. Despite the positive results, the stock experienced a decline in value, possibly due to the conservative guidance for 2023.