Walmart shares tumble after cautious earnings outlook

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Walmart shares tumbled by 7 per cent on Thursday after the world’s largest retailer predicted weak consumer spending during the holiday season.

John Rainey, chief financial officer, told analysts the company had seen “a softening” starting in October, with “somewhat uneven” sales since. “And this gives us reason to think slightly more cautiously about the consumer versus 90 days ago” when Walmart last reported results, he said.

Walmart’s results are closely followed as a gauge of the strength of the US consumer, which has proven relatively resilient in the face of persistent inflation. Data on Wednesday showed underlying retail sales rose 0.2 per cent in October, while September’s increase was revised higher.

However, retailers say shoppers are shifting towards essentials and groceries and away from discretionary purchases.

Walmart reported comparable sales growth — a closely watched industry measure — of 4.9 per cent in the third quarter, ahead of Wall Street forecasts of about 3.2 per cent.

Meanwhile, its third-quarter revenue of $160.8bn and adjusted earnings of $1.53 a share came in slightly ahead of expectations.

However the Arkansas-based group said that while sales strength in its US operations were led by grocery and health and wellness categories, general merchandise sales “declined modestly”.

Walmart said it forecast full-year net sales growth in the range of 5 per cent to 5.5 per cent, compared with previous guidance of 4 per cent to 4.5 per cent.

It also said it expected full-year adjusted earnings per share of between $6.40 to $6.48, from $6.36 to $6.46 a share previously, compared with analysts’ expectations of $6.48 a share.

The restrained assessment from Walmart executives contrasted with an improved sales and earnings outlook from rival Target on Wednesday, which had propelled Walmart shares to a record high.

Meanwhile, Macy’s, the department store chain, reported strong results on Thursday, sending its shares more than 10 per cent higher.