Walmart (WMT) is staying laser-focused on its margins as it gears up for a closely watched May 21 earnings report.
The news: Walmart said this week it will cut 1,000 corporate jobs to address redundancies and duplicate roles. The megaretailer laid off 1,500 corporate employees last May.
The layoffs come as Walmart’s stock trades at a record high. It’s seen as a winner as consumers become increasingly cautious due to high energy prices. Walmart stock is up 17% this year, outperforming the S&P 500’s (^GSPC) 8% gain.
“Management pushed back on concerns of demand erosion, highlighting stable behavior, resilient price gaps, and manageable cost pressures,” Jefferies analyst Corey Tarlowe wrote in a note after a recent meeting with execs at the retailer. “Value, convenience, improving e‑commerce economics, Walmart+‑driven frequency, and early AI benefits underpin confidence in WMT’s ability to navigate a choppy macro.”
It’s getting tough out there in consumer land: The surge in gas prices has meant a rapidly deteriorating picture of spending power, particularly for Walmart’s key lower-income consumers, Citi analyst Jon Tower warned in a note on Wednesday.
Tower’s data shows aggregate purchasing power (netting wages and job growth against inflation) dipped negative for all sub-$50,000 (annual income) consumers in April. Compared to last year, middle-income consumers ($50,000-$70,000) are paying over $90 per month more for essentials, and more than $75 of that increase occurred in just the past two months.
“Growth in spending power is slowing across the board,” Tower said.
Bottom line: This will be a tricky Walmart earnings report for investors. Clearly, the company is firing on all operational cylinders under new CEO John Furner. Its low-price business model is ideal for the current economic climate.
But a lot of expectations are priced into Walmart’s stock, which is trading at a 44 times forward price-to-earnings multiple. Note that the S&P 500’s forward price-to-earnings multiple is around 23 times.
The stock could let off some steam if guidance isn’t raised by a decent degree, which appears to be the concern on the Street at the moment.
“We do not expect management to raise full-year guidance (it did not after 1Q25, either) because of uncertainties related to fuel prices/freight and the response of consumers to a prolonged increase in gas prices,” Citi analyst Paul Lejuez said in a note.
Brian Sozzi is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
