The Bellwether Of Retail Warns Of Rough Seas Ahead

Like Nicki Minaj once said, pound the alarm: The markets freaked out yesterday after the world’s biggest retailer, Walmart, forecast that inflation fatigue and general uneasiness among shoppers will slow its growth over the next year, stoking fears of a broader slump in consumer spending.

The Dow fell 1% yesterday, the S&P 500 dipped 0.4%, and the Nasdaq declined 0.5% as investors dumped shares across sectors—not just retail, since Walmart’s ~$800 billion business is seen as a microcosm of the entire economy. The megastore’s stock tumbled more than 6% after the company released its lackluster sales guidance:

• Walmart projects 3% to 4% full-year sales growth, below Wall Street’s expectations and well under the 5.1% growth it logged last year.
• It expects operating income to rise by no more than 5.5%, which is half as high as Wall Street’s 11% target. If Walmart’s prediction comes true, it’ll be a steep drop-off from last year’s 8.6% profit growth.

But…Walmart tends to strike a cautious tone at the beginning of the year, leaving room to lift its outlook as the year progresses, analysts noted.

“We are in an uncertain time,” Walmart CFO John David Rainey said on an investor call yesterday, in reference to President Donald Trump’s tariffs, which Walmart didn’t factor into its lower-than-expected guidance, according to Rainey. Walmart won’t be “completely immune” from tariffs, he said, since the superstore imports some groceries from Mexico and many general goods from China. But unlike smaller competitors, it can leverage its size to keep suppliers from raising prices too much.

Zoom out: Walmart’s business is still strong. Its stock had been up 77% over the past year prior to yesterday, largely thanks to gains among $100,000+ households that have had to prioritize lower-cost groceries amid inflation. A growth warning from the purveyor of bargain goods could spell trouble for other retailers.—ML