Walmart earnings preview: retailer vulnerable to inflation, but remains king of retail

Walmart Inc. (NYSE: WMT) will report Q4 and full-year results Tuesday morning. The retailing giant will be closely watched amid a difficult environment dominated by economic and inflation concerns at the macro and micro level.

Heading into the report, location analytics company Placer.ai commented that Walmart in particular is showing concerning trends.

Walmart is vulnerable to inflation

According to Placer.ai’s research, Walmart consumers rank at the low-end on the economic spectrum with a median household income of $54,800. This compares to fellow peers BJ’s Wholesale Club Holdings, Inc. (NYSE: BJ) and Target Corporation (NYSE: TGT) at $62,700 and $63,700, respectively.

Cash-strapped consumers tend to “trade-down” when economic conditions deteriorate. Traffic trends at Walmart appear to support this thesis. According to Placer.ai, year-over-three-year change in store visits at Walmart were down 1.9% in October 2022, down 6.5% in November, and down 1.2% in December.

In each month, Walmart posted the worst performance among its rivals.

The graphic above shows that Walmart’s Sam’s Club unit is performing just fine. However, Q3 results show Sam’s Club accounted for $21.4 billion of Walmart’s total $152.8 billion so any unexpected strength from the Costco rival is unlikely to offset weakness at the core Walmart brand.

Walmart remains king of retail

Walmart’s vulnerability to inflationary concerns isn’t a foregone conclusion. Invezz reported last year how one notable stock picking pro is bullish on Walmart because it is in fact well positioned to combat against inflation.

Tuesday’s print could offer some clarity if it is indeed in a strong position to address consumer concerns. 

Regardless, Walmart is still the undisputed king of retail. According to placer.ai, 59% of all visits to Walmart, Target, BJ’s, Sam’s Club, and Costco went to Walmart.

Moreover, between 74.4% and 92.1% of visitors to other superstores visited a Walmart store at least once in 2022. Between 21.3% and 44.5% of visitors visited a Walmart at least 12 times a year. Placer.ai notes:

This all indicated that Walmart is still extremely well positioned to hold on to its throne as America’s reigning superstore despite the stiffening competition.