Despite a cautious guidance for 2023 and a slip in pre-market trading, shares of Walmart are climbing higher on Tuesday.
The retailer said its economic outlook for 2023 was lowered because consumers were likely to continue shopping for cheaper-priced items that could pressure its margins.
"Walmart’s razor sharp focus on keeping prices lower means margins are set to bear the brunt of hikes from suppliers who are passing on the unwelcome effects of high input prices. With fears of a fresh triple rate hike this year from the Federal Reserve growing, cash-strapped shoppers will be rooting out deals to make ends meet as borrowing costs rise," Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, told FOX Business.
Walmart CFO, John David, said on the retailer's fiscal fourth quarter earnings call, "With respect to our guidance, there is a lot of uncertainty with the macro backdrop."
"We’ve not been in a position where we’ve seen the Fed tighten this sharply, and there are a lot of unknowns on the back half of the year," he added. "What we’ve attempted to do is balance our guidance with a cautious outlook on the macro environment."
The Bureau of Labor Statistics' monthly consumer price index report for January showed that prices for food at home – the classification for food bought at the store to be prepared at home – were up 11.3% compared to 2022.
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With elevated prices for groceries, Walmart delivered adjusted earnings of $1.71 a share, beating estimates of $1.52. Revenue reached $164 billion, up 7.3%, beating estimates of $159.7 billion, according to FactSet.
The company's quarterly attributable net income also went up, rising 76.2% to $6.28 billion, helped by unrealized gains in equity and other investments.
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Meanwhile, U.S. same-store sales, an industry metric tracking revenue at stores open for more than a year, peaked at 8.3% to pummel expectations for a 4.9% increase.
Streeter said the world's largest retailer does have an opportunity to widen market share if consumers can be persuaded to hang around once inflationary pressures subside.
"Walmart's multi-channel approach should stand it in good stead in this respect. While it has seriously upped its e-commerce game, it also caters for the ‘shopping experience’ through its vast network of bricks and mortar stores. This combination of catering for shoppers keen to browse in-store, the convenience of curbside pick -up services and ease of booking delivery slots should help shelter Walmart better than companies like Amazon which is only just planning a physical store expansion," Streeter told FOX Business in a statement.
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Eric Revell of FOX Business and Reuters contributed to this report.
