Walmart and Home Depot Earnings Indicates Retail Spending Is Under Pressure
giants Walmart (NYSE: WMT) and Home
Depot (NYSE: HD) reported
their quarterly earnings earlier this week. Walmart reported
revenue of $164 billion and adjusted earnings of $1.71 per share in
fiscal Q4. Comparatively, Wall Street forecast the retail giant to
report revenue of $159.72 billion and earnings of $1.51 per share
in the quarter that ended in January.
Walmart, one of the largest retail companies in the world, also
reported a net income of $6.3 billion, up from its year-ago net
income of $3.56 billion. Its revenue rose by 7.3% year over
Home Depot, on the other hand, reported revenue of $35.83
billion and earnings of $3.30 per share. Analysts forecast it to
post revenue of $35.97 billion and earnings of $3.28 per share in
While Walmart beat estimates, Home Depot missed revenue forecast
for the first time since November 2019. HD stock was down 7% on
Tuesday due to this miss.
Let’s see what impacted the performance of Home Depot and
Walmart in the most recent quarter.
Walmart tops holiday quarter earnings
Walmart is a big box discount retailer and managed to attract
budget-conscious customers during the holiday season as shoppers
searched for food products, gifts, and household items. It now
expects same-store sales in the country to rise between 2% and 2.5%
in the next fiscal year, which was below consensus estimates of a
The company’s CFO, John David Rainey, confirmed the demand for
discretionary items has fallen due to elevated prices for grocery
items, which is factored for the forecast in the upcoming 12
In an interview with CNBC, Rainey explained, “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.”
While same-store sales (excluding fuel) for Walmart in the U.S.
surged 8.3%, e-commerce sales were up 17% year over year.
Valued at a market cap of $400 billion, Walmart stock offers
investors a dividend yield of 1.6%. Shares of the retail
heavyweight are currently trading at a discount of 10% to the
consensus price target estimate.
What next for HD stock price and investors?
Home Depot’s sales and adjusted earnings both rose by a marginal
0.3% year over year in fiscal
Q4 of 2023. The slowdown in the housing market and a shift in
consumer spending acted as headwinds for the company in fiscal Q4
(which ended in January).
Home Depot expects sales in fiscal 2024 to be flat year over
year with an operating margin of 14.5%. In the January quarter, its
operating margins stood at 33.3%. Its earnings are also likely to
fall by mid-single-digit percentages, especially if lumber prices
remain under pressure.
Home Depot expects consumer spending to be tepid in the home
goods segment, compared to the last three years, as total customer
transactions fell 6% in Q4 compared to the year-ago
However, this was offset by a 5.8% increase in the average
ticket cost, which stood at $90.05.
The growth in average selling prices was driven by inflation and
demand for new products.
As mortgage rates increase, the housing market is bound to
experience a slowdown which will negatively impact the top line for
Home Depot in the near term.
In the last 12 months, its sales rose 4.1% to $157.4 billion,
while its net income rose to $17.1 billion, compared to $16.4
billion in fiscal 2022.
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