Walmart Shares Sink on Soft Sales Forecast. Is It Time to Buy the Stock on the Dip?
Walmart (NYSE: WMT) has been one of the biggest winners in the retail space, but its shares slipped after the retail giant issued a cautious 2025 outlook. The stock is still up about 65% over the past year, as of this writing.
Let's take a closer look at its results and guidance to see if this dip is a good buying opportunity.
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Solid sales but subdued outlook
Walmart continued its consistent mid-single-digits revenue growth in the fourth quarter, with revenue increasing 4.1%, or 5.3% in constant currencies, to $180.6 billion. Adjusted earnings per share (EPS), meanwhile, rose 10% to $0.66. The results edged past analyst estimates calling for revenue of $180 billion and adjusted EPS of $0.64, as compiled by LSEG.
In the U.S., Walmart store sales rose by 5% to $123.5 billion, while same-store sales jumped 4.6% without fuel. Average ticket grew by 1.8%, while transactions increased by 2.8%. E-commerce soared 20%, led by store-fulfilled pickup and delivery, advertising, and marketplace.
Walmart continues to see strong growth in its Walmart Connect advertising business, with U.S. revenue jumping by 24% in the quarter. The company is also continuing to make big strides in its online marketplace business, with revenue soaring 37%. Marketplace sellers using its advertising services increased by 50%. It also noted that almost 45% of marketplace orders were now being fulfilled by Walmart Fulfillment Services, and that it was investing in supply chain automation to improve costs and delivery efficiency.
Walmart+ memberships grew by double digits once again. The company said the number of customers getting same-day deliveries in less than three hours or under an hour have soared. It also noted strong momentum with its new pharmacy delivery program.
Grocery continues to be a standout category for the retailer, while health and wellness sales growth led the way, primarily due to the sales of GLP-1 weight-loss drugs. General merchandise sales continued to rebound, with strength in toys, home, and fashion.
Internationally, Walmart sales slipped 0.7% to $32.2 billion, but were up 5.6% in constant currencies. The company said it saw strong growth in China, Mexico, and Canada. However, a calendar shift related to Flipkart's (India e-commerce) "The Big Billion Days" event hurt growth. International e-commerce sales rose 4%, while advertising revenue increased 10%, both hurt by the Flipkart calendar shift.
Walmart's warehouse store concept, Sam's Club U.S., saw its revenue climb 5.7% to $23.1 billion. Same-store sales, excluding fuel, surged 6.8%, with transactions up 5.4% and the average ticket rising 1.3%. E-commerce sales climbed 24%, while memberships rose 13% year over year. The company recently launched same-day and next-day shipping for Sam's Club, which was a hit with members. It also said that Sam's+ membership penetration continues to grow.
This table shows Walmart's important revenue and profitability metrics by segment for the fourth quarter.
| Metric | Walmart U.S. | Walmart International | Sam's Club | Overall |
|---|---|---|---|---|
| Revenue (in billions) | $123.5 | $32.2 | $23.1 | $180.6 |
| Revenue growth | 5% | -0.7% | 5.7% | 4.1% |
| Same-store sales growth | 4.6% | N/A | 6.8% | |
| - Transactions | 2.8% | N/A | 5.4% | |
| - Ticket | 1.8% | N/A | 1.3% | |
| - E-commerce | 20% | 4% | 24% | 16% |
Data source: Walmart.
Looking ahead, Walmart forecast fiscal 2026 revenue to increase between 3% to 4% in constant currencies, with adjusted EPS to come in at a range of $2.50 to $2.60. It also said it was looking for adjusted operating income growth of 3.5% to 5.5%.
For the first quarter, it is looking for revenue growth of 3% to 4% and adjusted EPS of between $0.57 to $0.58.
| Q1 Guidance | Full-year guidance | |
|---|---|---|
| Revenue growth (constant currency) | 3% to 4% | 3% to 4% |
| Operating income growth (constant currency) | 0.5% to 2% | 3.5% to 5.5% |
| Adjusted EPS | $0.57 to $0.58 | $2.50 to $2.60 |
Image source: Getty Images.
Is it time to buy the dip in Walmart stock?
While investors were unhappy with Walmart's full-year guidance, it is actually pretty similar to its original forecast last year, when it was looking for constant currency revenue growth of 3% to 4% and adjusted operating income growth of 4% to 6%. The company then consistently raised guidance throughout the year and ended up with 5.6% constant currency revenue growth and 8.6% adjusted operating income growth for fiscal 2025.
Overall, the company is seeing the same dynamics at play driving its business. Upper-income households, or those earning more than $100,000 a year, continue to be the biggest growth driver for the company. They are spending more and enjoying the convenience of same-day delivery at Walmart stores, and now with Sam's Club as well.
Grocery continues to be Walmart's bread and butter, but that strength is emanating to other areas like pharmacy while also helping a rebound in general merchandise. The company's also making nice strides with its e-commerce marketplace business and with advertising.
From a valuation standpoint, Walmart's shares now trade at a forward price-to-earnings (P/E) ratio of about 35 times this year's analyst estimates, which is certainly high compared to its recent historical valuation.
WMT PE Ratio (Forward) data by YCharts.
Overall, I think Walmart should be a solid long-term winner and that its story remains intact. However, its valuation is a bit ahead of itself, even after the pullback. As such, I think it is better to hold on to shares, rather than add to or enter new positions in the stock at this time.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool has a disclosure policy.
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