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Walmart warns of a slower 2025. That’s a bad sign for America’s economy

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During America’s inflation crisis, shoppers have flooded to Walmart for groceries and clothing, looking for good deals on all manner of essentials. But Walmart said Thursday 2025 will be trickier as consumers grow increasingly frustrated with inflation and concerned about President Donald Trump’s tariffs.

Walmart warned Thursday that its sales and profit growth will slow this year. The forecast sent its stock tumbling around 6% during early trading. It also dragged down the Dow, which fell more than 1%.

To be sure, Walmart’s business remains relatively strong and consumers are “resilient,” the company said. Walmart said sales will grow by up to 4% this year and profit will grow up to 5.5%. But that was short of investor expectations.

Walmart (WMT) is the largest retailer in the United States and a bellwether for consumer spending. Its projected slowdown is a signal for the rest of the retail industry that 2025 will be a rockier year.

David Silverman, a senior director at Fitch Ratings, expects “retail choppiness to continue in 2025,” given a recent dip in consumer sentiment, particularly for lower-end consumers and tariffs, he said in a note to clients Thursday.

Customers making more than $100,000 a year looking to save on groceries have fueled the growth at Walmart in recent years. Walmart has also built a strong online operation to rival Amazon. It has added the option to buy online and pickup in store to thousands of its locations and Walmart+, a same-day grocery delivery membership program.

But Walmart acknowledged it will have to navigate tariffs and manage other challenges.

Trump recently enacted a 10% across-board-tariff on goods coming from China and 25% tariffs on all steel and aluminum imports. Trump has paused tariffs on Mexico and Canada until March and also pledged to impose “reciprocal tariffs.”

Walmart’s outlook “assumes a relatively stable macroeconomic environment” but “acknowledges that there are still uncertainties related to consumer behavior and global economic and geopolitical conditions,” Walmart finance chief John David Rainey said on a call with analysts.

Walmart will be able to handle tariffs better than most companies because it can apply its size and scale to muscle down prices with suppliers. Smaller companies have less leverage and may have to raise prices for consumers, economists say.

Still, in an interview with CNBC, Rainey said Walmart “is not going to be completely immune” from tariffs.

Americans are showing signs of concern about the economy. Most adults nationwide, 62%, feel President Donald Trump has not gone far enough in trying to reduce the price of everyday goods, according to new CNN polling.

Consumer prices rose 0.5% last month from December — the fastest pace in more than a year — as energy and food costs continued to bite. Egg prices have soared as a result of a deadly avian flu.

Walmart said that it expects normal inflation this year of 1% to 2%, despite the rise in egg prices.

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Walmart shares drop as retailer says profit growth will slow

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Walmart
shares fell roughly 6% in afternoon trading Thursday, as the big-box retailer said profit growth will slow this fiscal year even as sales continue to climb.

Walmart said holiday-quarter revenue rose about 4% and e-commerce sales shot up 20% in the U.S., as growth in store pickup and home deliveries and gains with upper-income shoppers boosted results. But its outlook disappointed Wall Street.

In the fiscal year ahead, the discounter said it expects net sales to grow 3% to 4% and adjusted operating income to increase between 3.5% to 5.5% on a constant currency basis. The company said that includes a 150 basis point, or 1.5 percentage point, headwind from acquiring smart TV company Vizio and following a leap year in 2024. For the just completed fiscal year, Walmart posted adjusted operating income growth of 9.7% on a constant currency basis.

The company also said it expects full-year adjusted earnings of $2.50 to $2.60 per share, which includes a 5 cent per share headwind from currency. That fell short of the $2.76 per share Wall Street had expected.

In an interview with CNBC, Chief Financial Officer John David Rainey described consumer spending patterns as “steady” and said “there’s not any sharp changes that we’ve seen.”

Yet he acknowledged “there’s far from certainty in the geopolitical landscape.”

About two-thirds of what Walmart sells is made, grown or assembled in the U.S. Yet if tariffs on imports from Mexico and Canada take effect, he said Walmart is “not going to be completely immune.”

“We’ve lived in a tariff environment for the last seven or eight years, and we’ll do what we know how to do,” he said. “We’ll work with suppliers. We’ll lean into our private brand. We’ll shift supply where necessary to try to take advantage of lower costs that we can then pass on to consumers.”

Since Walmart is not sure if the tariffs will take effect next month, the company did not factor them into its guidance, Rainey said.

Here is what the big-box retailer reported for the fiscal fourth quarter compared with Wall Street’s estimates, according to a survey of analysts by LSEG:

In the three-month period that ended Jan. 31, Walmart’s net income fell to $5.25 billion, or 65 cents per share, compared with $5.49 billion or 68 cents per share in the year-ago period. Revenue rose from $173.39 billion in the year-ago quarter. The company’s adjusted earnings per share figure excluded one-time items, including opioid-related legal costs and gains and losses on equity and other investments.

Comparable sales, an industry metric also known as same-store sales, increased 4.6% for Walmart’s U.S. business and 6.8% for Sam’s Club, excluding fuel.

Walmart’s e-commerce sales in the U.S. soared 20% compared with the year-ago period. That marked the 11th straight quarter of double-digit gains. Global e-commerce sales rose 16%.

In the Walmart U.S. segment, customers’ store visits and purchases climbed, as transactions rose 2.8% and average ticket increased 1.8% year over year.

Since Walmart is the nation’s top grocer, investors often view it as a barometer of consumer health. Investors have tried to parse whether softer U.S. retail sales in January were a blip or warning sign. Wall Street also is trying to understand the potential impact of policy decisions, such as tariffs, on consumer spending.

Restaurant chains, including Restaurant Brands
’ Burger King and Popeyes, said sales improved in the fourth quarter, but they had weak trends in January.

Yet those restaurants and some retail experts have blamed short-term factors for the drop, including winter storms, consumers taking a break after splurging over the holidays and contending with damage and disruption from the Los Angeles wildfires.

Rainey echoed those sentiments on the call with CNBC, saying cold weather and the wildfires hurt Walmart’s sales. He said that’s temporary, however, and doesn’t indicate a change in consumer spending patterns.

Even so, the big-box retailer faced many questions from retail analysts on Thursday’s earnings call about the reasons for its conservative forecast.

On the earnings call, Rainey said the outlook is consistent with Walmart’s guidance for the last two years, when it projected operating income growth of 4% to 6% annually. If the company took out the impact from the Vizio acquisition and extra day from leap year, he said the outlook would be 5% to 7%, which would represent an acceleration from its previous guidance ranges.

Still, he said, “it’s prudent to have an outlook that is somewhat measured.”

“We have to acknowledge that we are in an uncertain time and we don’t want to get out over our skis here,” he said. “There’s a lot of the year to play out. Again, we feel good about our ability to navigate the environment, whether it’s tariffs or other macro [economic] uncertainty.”

Walmart has taken a page from rival Amazon’s book, as it chases ways make money outside of retail. Those newer moneymakers worked in its favor in the fourth quarter. Its advertising business and third-party marketplace are small compared with Amazon’s, but have posted gains and driven higher margins than Walmart’s retail business.

Global membership income grew by 16% year over year, with some of that coming from its subscription-based membership program, Walmart+, in addition to warehouse club Sam’s Club. Its global advertising business grew 29%, including a 24% increase in Walmart Connect.

Walmart’s third-party marketplace and its fulfillment services segment, which packs and ships orders for marketplace sellers, also rose by double digits.

“These are all higher margin, faster-growing parts of our business where the math is just suggesting that our margins are going up over time,” he said on the call with CNBC. “And frankly, I don’t see any end to this.”

Faster and more frequent deliveries have helped Walmart’s e-commerce business become more profitable. On the earnings call, Rainey said the delivery routes for Walmart have become denser as customers place more orders. Plus, he said, shoppers have shown a willingness to pay more to speed online orders to their doors.

Over 30% of Walmart customers who have an item delivered from a store have paid an extra fee to have that delivered within a few hours, Rainey said. On Christmas Eve, he said, 77% of orders were express deliveries. Those faster deliveries, which are made in less than two hours, cost an additional $10.

One of Walmart’s newer services, pharmacy deliveries, is a growth opportunity, too, Walmart U.S. CEO John Furner said on the earnings call. The deliveries began in October in six states, but have expanded across the country.

As customers order a prescription for a sick family member or place an order for their regular medication, many are buying other items like groceries, Furner said.

Walmart also hiked its dividend by 13% to 94 cents per share, the largest increase in more than a decade.

As of Wednesday’s close, shares of Walmart are up about 83% over the past year. The stock closed on Wednesday at $104.00, up about 15% so far this year and outpacing the approximately 4% gains of the S&P 500 during the same period.

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Walmart rolled through 2024, but uncertainty about consumers and tariffs seep into year ahead

Shown is a Walmart location in Philadelphia, Wednesday, Nov. 17, 2021. (AP Photo/Matt Rourke, File)

NEW YORK (AP) — Walmart delivered another year of strong sales and profits as its competitive prices became a strong magnet for inflation-weary shoppers. Yet uncertainty about the state of the American consumer and the potential impact of tariffs have seeped into expectations for 2025.

The financial outlook from nation’s largest retailer, which has thrived amid stubborn inflation, delivered a jolt across the retail sector. Walmart sees per share profit over the next year coming in as much as 27 cents below analyst projections, a notable shift that sent company shares down more than 6% in midday trading.

Its sales outlook was also mild, potentially a reflection of challenges ahead as consumers pull back on spending and President Donald Trump’s tariffs on China and other countries threaten the low-price model that is the core of Walmart’s success.

During an interview with The Associated Press Thursday, Walmart’s Chief Financial Officer John David Rainey said shoppers remain resilient while cautious, but there is no apparent change in behavior related to tariffs.

There is more uncertainty about what lies ahead and Rainey said Walmart’s measured guidance reflects that.

“We are one month into the year, and there’s a lot that we don’t know,” Rainey said, citing the new tariff increases.

Walmart did not incorporate tariffs into its financial outlook, but Rainey acknowledged that the company’s isn’t immune to their impact.

“We’re going to work really hard to keep prices low for our members and customers,” Rainey said. “We will do the things that we can.”

That means being nimble with sourcing. Walmart, for example, is exploring new sourcing for microwave ovens given increased tariffs on aluminum and steel. But Rainey said some goods may have price increases.

Tariffs in the headlines have fueled concern and some more shopper retrenchment in Walmart’s Mexico business, Rainey said.

Walmart has built in hedges against some tariff threats. Two-thirds of Walmart’s merchandise is sourced in the U.S., with groceries driving much of that. Groceries account for roughly 60%, of Walmart’s U.S. business.

Still, Walmart shares took a hit, and other big retailers fell, too.

Walmart is among the first major U.S. retailers to report financial results and the numbers can provide a hint as to the mood of the American shopper. Over the past year Americans have focused increasingly on necessities rather than big TVs, furniture or appliances. They’ve become much more discerning because of higher costs for credit as well as for groceries.

Walmart has flourished in that environment. It’s gained market share, notably among households with incomes over $100,000. Walmart’s online offerings and paid membership, Walmart +, have also drawn wealthier customers

“We have momentum driven by our low prices, a growing assortment, and an eCommerce business driven by faster delivery times,” said CEO Doug McMillon. “We’re gaining market share, our top line is healthy, and we’re in great shape with inventory.”

Still, Walmart could be faced with challenges with the new tariffs carrying more economic risks than during Trump’s first term. If Americans are hit by a new wave of price increases, economists say, and with 70% of the U.S. economy driven by consumers a broad pullback in spending would have ramifications beyond Walmart’s sales.

Government data last week revealed a sharp drop in January retail sales as cold weather kept more Americans indoors. But it was a much bigger drop than economists expected and the biggest in a year.

Walmart, based in Bentonville, Arkansas, reported earnings of $5.25 billion, or 65 cents per share, in the quarter ended Jan. 31. That compares with $5.49 billion, or 68 cents per share, in the year-ago period. Adjusted earnings per share for the most recent quarter was 66 cents. Sales rose 4.1% to $180.55 billion in the quarter.

Analysts expected 65 cents per share on sales of $180.07 billion, according to FactSet.

For Walmart’s U.S. division, comparable store sales — which include online and stores open for the past 12 months — rose 4.6% in the U.S., a bit lower than the 5.3% in the previous quarter. The retailer had a 4.2% jump in the U.S. in the second quarter and 3.8% in the first quarter.

Global e-commerce sales rose 16% in the latest quarter, notably slower than the 27% increase in the third quarter.

Walmart expects first quarter earnings per share of between 57 cents and 58 cents, well below the 64 cents Wall Street was expecting, and for the year. Walmart projects earnings per share in the range of $2.50 to $2.60. That’s also off the $2.77 that analysts are predicting, according to FactSet.

It forecast a 3% to 4% increase in quarterly sales or between $166.35 billion and $167.97 billion. That is also a bit light, with analysts expecting sales of $167.05 billion.

Walmart expects annual sales to rise between 3% and 4%, or between $667.57 billion and $674.05 billion. That too falls short of the $708.72 billion that Wall Street projected.