Wal-Mart Stock Drops on Dim Guidance

US same-store sales, a metric that tracks industry returns in stores open more than a year, jumped 8.3%, beating expectations for a 4.9% increase.

Despite an outperforming fourth quarter, Wal-Mart shares fell 4% in pre-market trading on the company’s cautious guidance. For fiscal 2024, Walmart expects adjusted earnings per share to be between $5.90 and $6.05, below consensus estimates of $6.53, according to FactSet. The company said net sales will grow between 2.5% and 3%.

Some of the factors that will affect earnings in the following year include higher tax rates and interest expenses. Wal-Mart also sees operating income decline by 1% thanks to an inventory accounting metric called “last in, first out,” or LIFO. like Barron It was previously observed that, under inflationary environments, purchased more recently, more expensive goods hit profit.

First quarter guidance was also muted. The company said earnings per share would range between $1.25 and $1.30. Analysts had expected $1.37 earnings per share for the first quarter of the fiscal year. LIFO will be an issue in the first quarter as well. Wal-Mart expects operating income to decline by 2.34 percentage points, or 3 cents per share, due to the accounting method.

Wal-Mart’s fourth-quarter earnings outperformance wasn’t much of a surprise. The company has easily beat estimates over the past two quarters, buoyed by strong same-store sales performance, a trend that continued this quarter. Key to Walmart’s growth has been the grocery business, which has been gaining market share as inflation has pushed shoppers to look for better deals. Wal-Mart’s executive team has said repeatedly that the company is seeing an uptick in visits by high-income shoppers looking to stretch their budgets, a trend that could continue through the rest of the year, analysts say.

And indeed, Wal-Mart had a strong year. Total revenue grew 6.7% to $611.3 billion in fiscal 2023, which ended Jan. 27. Same-store sales grew 6.6%, while the company reported adjusted earnings per share of $6.29. Analysts had expected sales of $606.6 billion and earnings of $6.09 per share.

But fiscal 2024 is shaping up to be very different if Wal-Mart’s guidance is anything to go by.

Walmart will host a call with investors at 8 a.m. ET to provide more color on its guidance and performance this past year.

The company returned $16 billion through dividends and stock repurchases in 2023. On Tuesday, Walmart said its board of directors approved an annual dividend of $2.28 for fiscal year 2024, up 2% year-over-year.

Write to Sabrina Escobar at [email protected]