Walmart and Home Depot Earnings Indicates Retail Spending Is Under Pressure
February 24 2023 - 05:23AM
Walmart (NYSE: WMT) and Home Depot
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
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
Let’s see what impacted the
performance of Home Depot and Walmart in the most recent
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 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
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
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
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
The growth in average selling
prices was driven by inflation and demand for new
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
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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