As Walmart Inc. WMT gears up to release its second-quarter results today, the market is on high alert for any signs of consumer spending trends.
What Happened: Investors and analysts are keeping a close eye on Walmart, as any signs of a quicker-than-anticipated slowdown in spending could potentially shake up the stocks of other consumer-oriented companies.
However, the general sentiment remains hopeful.
This came after other major players, such as Amazon.com Inc. AMZN and Airbnb Inc. ABNB, cited various factors, including global events and new regulations, as reasons for a potential decline in consumer demand.
Evercore ISI analyst Greg Melich expects Walmart’s commentary to indicate a stable consumer environment, with positive traffic and share gain reasons. Wall Street’s prediction for Walmart’s sales growth is slightly lower than the peak pandemic levels, but still robust, likely to meet or surpass analysts’ expectations.
"Walmart will speak to a steady low- to middle-income consumer backdrop, in addition to ongoing higher income consumer trade-in, with positive traffic and share gain reasons for the commentary to skew constructive through the year," said Melich, according to Barron’s.
What To Expect From Walmart?
Wall Street expects Walmart to report quarterly earnings at $0.64 per share on revenue of $168.57 billion before the opening bell, according to data from Benzinga Pro. Walmart shares gained 0.50% to $69.00 in premarket trading.
Why Are Analysts So Upbeat About Walmart Earnings?
Joseph Feldman, an analyst at Telsey Advisory Group, believes that Walmart’s investments in automation across its supply chain, along with gains from its rapidly expanding advertising and fulfillment businesses, may have likely contributed to profit growth.
Third-party data from Placer.ai shows healthy sales growth during the quarter, with visits to Walmart stores and Sam's Club outlets rising by 3.9% and 7.5% respectively, compared to the same period last year.
“The company is distinguishing itself from the rest of retail with continued momentum—albeit with some moderation—amid a slowing consumer backdrop,” Deutsche Bank analyst Krisztina Katai pointed out.
Why It Matters: Walmart’s Q2 earnings are particularly significant against the backdrop of recent developments in the retail sector. Airbnb recently anticipated a decrease in U.S. bookings amid dipping consumer sentiments. The vacation rental company cited global events, including the ongoing Israel War, and new regulations in California.
Similarly, Amazon also attributed its lower revenue forecast to the Paris Olympics and the recent assassination attempt on former President Donald Trump. Amazon's finance chief, Brian Olsavsky, said consumers are "continuing to be cautious" and are more focused on buying everyday essentials, which could explain the revenue shortfall.
These concerns are further compounded by the recent slowdown in job creation. The July slowdown signaled cooling labor market conditions and strengthening the case for imminent interest rate cuts as early as next month.
Price Action: Walmart’s shares closed 0.8% up at $68.66 on Wednesday, and were up 0.50% at $69 in premarket trading at the time of writing on Thursday, according to Benzinga Pro data.
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This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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