Walmart-WMT Stock Down 6.5% on Q4 Results: What's Next for Investors?

Core Viewpoint - Walmart Inc. experienced a 6.5% decline in shares following its fourth-quarter fiscal 2025 earnings release, despite year-over-year growth in both top and bottom lines that exceeded expectations. The decline is attributed to cautious guidance for fiscal 2026, cost pressures, and macroeconomic uncertainties affecting consumer spending [1] Group 1: Financial Performance and Guidance - Walmart anticipates a slowdown in sales growth for fiscal 2026, projecting consolidated net sales growth of 3-4%, down from 5.6% in fiscal 2025. This deceleration is partly due to the strong prior-year performance and the impact of the leap year, which is expected to lower sales growth by about 100 basis points [3] - The company expects adjusted EPS for fiscal 2026 to be in the range of $2.50-$ 2.60, compared to $2.51 in fiscal 2025. First-quarter operating income is projected to grow only 0.5-2%, significantly below the full-year forecast of 3.5-5.5% growth, indicating near-term cost pressures [5] - Operating expenses deleveraged by 46 basis points in the fourth quarter, primarily due to higher variable pay, rising utilities, and marketing costs, along with integration costs from the Vizio acquisition impacting operating income [4] Group 2: Currency and International Exposure - Adverse foreign exchange fluctuations have been a persistent challenge for Walmart, with currency fluctuations reducing reported sales by over$ 2 billion in the fourth quarter. If current exchange rates persist, it could create a 100-basis point headwind to sales growth and a 150 basis point drag on operating income for fiscal 2026 [6] Group 3: Long-term Growth Prospects - Despite short-term challenges, Walmart's long-term growth trajectory remains strong, driven by omnichannel expansion, e-commerce profitability, and strategic investments in automation and advertising. Key international operations in regions like Mexico, India, and China are vital for long-term growth [7] - Walmart's omnichannel advantage is significant, with 93% of U.S. households covered by same-day delivery, enhancing customer engagement through seamless shopping experiences [8] - E-commerce sales rose by 16% in the fourth quarter, now contributing 18% of total sales, driven by improved delivery routes and fulfillment economics [9] - The company's advertising revenues surged by 27% to approximately $4.4 billion in the fourth quarter, while global membership income grew by 21% to nearly$ 3.8 billion, indicating strong performance in high-margin businesses [10][11] Group 4: Market Position and Valuation - Walmart shares have increased by 66.3% over the past year, outperforming the broader Zacks Retail – Wholesale sector and the S&P 500 [12] - The company is trading above its 50 and 200-day moving averages, indicating strong upward momentum and positive market sentiment [15] - Walmart's forward 12-month price-to-earnings (P/E) ratio is 35.2, exceeding the industry average of 34.44, reflecting market confidence in its long-term growth potential [18]