Retail 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 year.

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 the quarter.

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 forecast

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 3% growth.

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 months.

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 period. 

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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