Walmart stock surges on strong Q4 earnings report: Is this the beginning of a retail revolution?

Walmart, the retail giant, has announced its holiday-quarter earnings and sales results for 2023 Q4. Walmart's adjusted earnings increased by 11.76% to $1.71 per share, while its revenue growth rose 7.3% to $164 billion.

The company's same-store sales excluding fuel in the U.S. rose 8.3%, Sam's Club comparable sales rose 12.2%, and online sales rose 17% over the year. The international revenue rose 2.1% to $27.6 billion, led by increases in Mexico and Central America, China and Canada.

The Guidance

Walmart, the largest retailer in the United States, released its Q4 2022 earnings report on Tuesday, revealing that it had topped analysts' expectations for both earnings and revenue. However, the company's guidance for the upcoming fiscal year was less optimistic, causing some concern among investors.

For the fourth quarter, Walmart reported earnings per share of $1.71, beating estimates of $1.52, and revenue of $164 billion, up 7.3% year-over-year and also ahead of expectations. Same-store sales, excluding fuel, increased by 8.3%, and online sales rose 17% over the year.

Despite the strong results, Walmart's guidance for the first quarter of fiscal 2024 was less impressive. The company expects net sales to increase by 4.5% to 5%, and adjusted earnings to be between $1.25 and $1.30 per share, compared to $1.30 reported in Q1 FY22. For the full fiscal year, Walmart projects adjusted earnings to be between $5.90 per share and $6.05 per share, down from $6.29 per share reported for fiscal 2023. Walmart's same-store U.S. sales, excluding fuel sales, are seen rising 2% to 2.5% for the fiscal year, and Sam's Club comparable sales are expected to increase 5%.

The guidance given by Walmart for its fiscal 2024 Q1 results includes the expected net sales to increase 4.5% to 5%. The retailer sees adjusted earnings ranging between $1.25 and $1.30 per share, compared to $1.30 reported in Q1 FY22. For the full year, Walmart projects adjusted earnings between $5.90 per share and $6.05 per share, down from $6.29 per share reported for fiscal 2023. The company projects 2.5% to 3% net sales growth.

Walmart stock edged up slightly early Tuesday after falling sharply lower premarket, given its less comfortable guidance. However, some analysts believes Walmart could see a boost from consumers watching their wallets.

"During the pandemic, retailers like Target (TGT) benefited from a trade-up consumer mentality. Now, as shoppers become increasingly cost-conscious and trade down, Walmart is in just the right position to benefit."

The Key

Despite the weaker guidance, Walmart's earnings report is generally seen as a positive sign for the retail industry, which has been hit hard by the pandemic. Walmart's strong online sales growth is particularly noteworthy, as the company has made significant investments in its e-commerce capabilities in recent years. As consumers continue to shift towards online shopping, Walmart's e-commerce business is likely to become an increasingly important driver of growth.

Physical stores are key for the retailer, and the company has closed its tech units. Brick-and-mortar conversion rates are much higher than its online options. However, after raising its hourly wages, Walmart will need to overcome pricing and supply chain challenges to maintain its value proposition.