Image Source: Mike Mozart, Flickr

Walmart (NYSE: WMT) banked $164.1 billion of revenue in the fourth quarter, per earnings results announced last week. This beat analyst expectations of $159.7 billion and was the biggest quarter in sales on record for Walmart US – banking more revenue than Apple (AAPL) and Home Depot (HD) combined. 

However, while this earnings beat was music to investors’ ears, the stock rose only slightly as the retail giant dampened the mood with a weaker-than-expected outlook for the year ahead, summing up nicely the crossroads the US economy is at.  

Walmart has been volatile in recent years

Walmart stock has been relatively strong in recent times, despite the stock market as a whole struggling. While the trajectory has been upward, it has been extremely volatile. The below chart paints a rocky ride through the pandemic years and into 2023. 

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The volatility is particularly notable when considering Walmart’s size. The grocery king’s revenue of nearly $160 billion blows even Apple’s most recent quarterly figure of $117.2 billion out of the water. 

Granted, Walmart’s market cap is six times smaller than Apple at $382 billion and so the comparison is a silly one, but a stock this size does not normally oscillate so wildly, especially a non-tech one. 

Walmart warns of rocky road ahead

However, the stock reacted relatively flat in this instance, a surprising departure from normal, especially considering the earnings beat. Investors peeled their optimism back off the back of guidance from executives on the year ahead:

 

The consumer is still very pressured. And if you look at economic indicators, balance sheets are running thinner and savings rates are declining relative to previous periods. And so that’s why we take a pretty cautious outlook on the rest of the year

CFO John David Rainey via CNBC

The earnings/guidance dichotomy sums up well the unique situation that the market finds itself in. On the one hand, inflation has surged to levels last seen in the 1970s, while on the other hand, fear abounds that the slowdown could be so severe enough to trigger a recession. 

Walmart pointed towards this uncertain macro environment through dampened expectations of sales growth for the year ahead compared to analysts’ expectations, pricing in the impact of ever-increasing interest rates on demand in the economy. 

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All in all, the guidance is in line with investors’ and companies’ thinking across the space. Look no further than fellow retail store Home Depot, which posted earnings on the same day last Tuesday. 

Home Depot warned of a similar slowdown to come but fared worse than Walmart off missed earnings. In fact, it was the first time since November 2019 that the store missed Wall Streets’ revenue expectations, and the stock closed down 7% on the day. 

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