Walmart (WMT), a retail giant known for its affordability, has been attracting a growing number of shoppers even as inflation and economic uncertainty put pressure on household budgets, the Street reports.
However, despite a strong 2024 holiday season, the company has issued a cautious outlook for the coming year, citing unpredictable consumer behavior and global economic challenges.
Walmart’s fourth-quarter earnings report for 2024 revealed a 4% year-over-year revenue increase during the holiday shopping period. The company also reported a 4.6% rise in US comparable sales, outperforming the 4% growth recorded in the previous year.
Key highlights of Walmart’s recent performance:
- Higher Consumer Transactions: More shoppers visited Walmart stores, contributing to sales growth.
- Increased Spending Per Visit: The average purchase amount rose by 1.8%.
- Profit Growth: Walmart’s U.S. operating income climbed 7.4% year-over-year.
- Higher-Income Shoppers: A notable portion of Walmart’s growth was driven by increased spending from upper-income consumers.
Despite strong momentum in 2024, Walmart has issued a weaker-than-expected forecast for 2025, predicting:
- 3% to 4% growth in net sales, below investor expectations.
- 3.5% to 5.5% growth in operating income, signaling potential financial challenges ahead.
During an earnings call on Feb. 20, Walmart Chief Financial Officer John Rainey emphasized the uncertainty in consumer behavior and economic conditions.
“Our outlook assumes a relatively stable macroeconomic environment but acknowledges that there are still uncertainties related to consumer behavior and global economic and geopolitical conditions,” Rainey stated.
Following the report, Walmart’s stock fell by 6% on the same day.
Two major factors could impact Walmart’s performance in the coming year:
1. Tariffs on Imported Goods
- The Trump administration imposed a 10% tariff on Chinese imports, prompting China to retaliate with tariffs on American goods.
- The former president also threatened a 25% tariff on imports from Mexico and Canada, though he postponed the decision by 30 days.
- Tariffs often lead to higher product costs, which can be passed on to consumers.
- Walmart CFO John Rainey previously warned that the retailer may have to raise prices due to tariffs, stating:
“Our model is everyday low prices. But there probably will be cases where prices will go up for consumers.”
2. Consumer Boycotts
- Walmart faces potential sales disruptions due to a planned boycott by consumer advocacy group The People’s Union.
- The group is calling for a 24-hour “economic blackout” on Feb. 28, targeting Walmart, Amazon, and Target.
- A week-long Walmart boycott is also planned for April 7-14.
- The movement protests corporate policies and broader industry corruption, with organizer John Schwarz stating:
“If enough of us participate, they will feel it. If they don’t listen, we escalate.”
Despite economic pressures and boycott threats, Walmart remains focused on keeping prices low.
“Our focus on bringing down pricing through rollbacks continues despite pockets of food inflation in areas like eggs, bacon, and ground beef,” said Rainey during the earnings call.
