Walmart shares tumble after cautious earnings outlook

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Walmart issued a relatively cautious outlook for consumer spending in the holiday season, with a restrained upgrade to its full-year earnings guidance offsetting forecast-beating quarterly results and sending shares sliding on Thursday.

The world’s largest retailer expects adjusted earnings per share to be between $6.40 to $6.48, from $6.36 to $6.46 a share previously, and compared with analysts’ expectations of $6.48 a share.

That appeared to overshadow its rosier guidance for net sales growth, and sent Walmart shares 7.5 per cent lower after Wall Street’s opening bell in a week when shares of other retailers have leapt on upbeat outlooks.

Still, results from the world’s largest retailer are closely followed for any insights they might provide on the US consumer — the main driver of the domestic economy. Walmart’s report remained consistent with the overarching theme of recent months that consumers were still spending, but shifting their purchases towards essentials and groceries and away from discretionary purchases.

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Although US consumers are facing pressure from inflation and high interest rates, their relative resilience is likely to help keep the domestic economy on course for a “soft landing”.

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

The Arkansas-based company said sales strength in its US operations were led by grocery and health and wellness categories, but general merchandise sales “declined modestly”.

Walmart’s third-quarter revenue of $160.8bn and adjusted earnings of $1.53 a share came in slightly ahead of Wall Street expectations.

The company 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.

Although investors appeared to have given Walmart shares a wide berth after its earnings guidance matched expectations, they were more generous with Macy’s. Shares of the department store chain operator surged more than 10 per cent on Thursday after its quarterly results beat expectations and it adjusted its full-year profit outlook.

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That echoed Target, whose shares notched their third-biggest daily jump on record on Wednesday after reporting forecast-beating quarterly earnings and providing a relatively upbeat outlook for the holiday season.

Target and Macy’s, which are more geared towards discretionary purchases, reported declining sales during their latest quarters.