US Stock Earnings Previewt: The Way Out for Walmart

Retail Grocery Giant Walmart (NYSE: WMT) is set to release its financial results for the fourth quarter of fiscal year 2025 before the market opens on February 20, 2025.

The market generally anticipates that this American retail behemoth, Walmart, will report earnings per share of $0.53, revenue of $180.2 billion, and operating profit of $6.8 billion.

Meanwhile, it is projected that Walmart's expected revenue for fiscal year 2026 will reach $707.8 billion, with an anticipated year-on-year growth rate of 4%. The earnings per share (EPS) is forecasted to be $2.75, showing an expected year-on-year growth of 6%.

Today, we will delve into the current situation that this global retail titan is facing, as well as the key aspects to keep an eye on in this earnings report.

The World's Largest Retail Enterprise

In 1962, a small discount store named Walmart opened its doors in Rogers, Arkansas, in the United States. With the core philosophy of "Every Day Low Prices", it swiftly attracted local customers.

This strategy shattered the traditional retailers' model that relied on high profit margins and seasonal promotions. Instead, it pledged to consistently offer low-priced goods, eschewing short-term discounts.

Relying on this positioning, Walmart gradually expanded from a local establishment to a national chain. Through optimizing its supply chain, establishing its own logistics network, and raising funds via listing, it expedited its expansion trajectory.

Today, Walmart stands as the world's largest retail enterprise. In fiscal year 2024, Walmart's global revenue amounted to $648.125 billion, registering a year-on-year growth of 6.03%. It boasts a total of 10,619 stores worldwide, spanning across 19 countries, and serves over 250 million customers. Walmart operates 5,205 stores in the United States, accounting for 8.59% of the U.S. retail market share.

Dilemma and Transformation

Walmart's main business comprises three major segments: Walmart U.S., Walmart International, and Sam's Club. At the present juncture, Walmart's offline sales are predominantly propelled by Sam's Club.

This trend is also evident in Walmart's Chinese market. Walmart China's net sales witnessed a year-on-year increase of 17%, with Sam's Club delivering an outstanding performance, registering positive growth in offline footfall.

Relying on the robust growth of Sam's Club to offset the overall sluggish performance, this situation lays bare the reality that Walmart's hypermarket model is gradually losing its appeal.

With the acceleration of the pace of life, comprehensive large-scale supermarkets are increasingly struggling to meet the diverse shopping needs of consumers and are no longer the sole choice for shoppers.

In the face of the waning effectiveness of the traditional hypermarket model, embracing e-commerce, placing bets on Sam's Club, and ramping up the pace of store openings have emerged as the strategies for Walmart to break through the impasse.

Highlights of the Earnings Report

The market has an especially keen focus on Walmart's earnings report this week. One crucial aspect is whether Walmart can sustain its growth amidst the high expectations for 2025 and the mounting tariff pressure.

However,analysts remain sanguine about Walmart's future prospects.

Kelly Bania, an analyst at BMO Capital Markets in Canada, pointed out that Walmart, Costco (COST.O), and Amazon (AMZN.O) will continue to expand their market share in the future. It is anticipated that their combined share of the U.S. food and consumer goods sales will range from 35% to 40%.

The analysis report by Bank of America underscored that the growth of market share across different income brackets bodes well for the continued strength of Walmart's food sales segment.

However, simultaneously, the 10% tariff imposed by the Trump administration on Chinese imports is likely to exert some pressure on Walmart's profit margins.

Walmart's Chief Financial Officer once stated in an interview with CNBC that, in the face of this tariff environment, the prices of certain goods are likely to see an uptick.

Currently, Walmart's stock price has been hovering around its historical high, signifying that its financial situation is becoming increasingly sensitive.

This time around, we need to pay close attention to the growth in the number of Sam's Club members to ensure the smooth progression of its offline store business. Additionally, aspects such as e-commerce sales performance, cash flow, revenue, profit margin, and future outlooks are also of great significance.

I believe these points are of considerable importance.

Moreover, Walmart's current stock price has already approached its historical high, and the market has already priced in a wave of positive expectations from the earnings report in advance. If this earnings report fails to meet expectations, there is a likelihood of a significant decline in the stock price, which investors should be vigilant about.$WMT