Walmart Skids On Earnings Miss, Target Earnings Due| Investor’s Business Daily

Retail giant Walmart (WMT) delivered a mixed first-quarter earnings report early Tuesday. Target (TGT) plans to report Wednesday. Walmart stock reversed early gains into sharp losses. Target stock also reversed lower.

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The big-box retail stocks report as investors try to gauge the impact of rising grocery prices on consumer spending, and after the chains benefited a year ago from pandemic-related stimulus payments to customers. Target stock, meanwhile, was setting up in a base.

Walmart Earnings, Walmart Stock

Estimates: Wall Street projected Walmart would earn $1.48 per share, down 14%, on revenue of $138.8 billion, up around 0.4%. Same-store sales were seen rising 2.4%.

Results: Earnings came in at $1.30 a share. Revenue eked past expectations, to $141.57 billion. Same store sales topped views, jumping 5.6% for the quarter. Management lowered expectations for the second quarter, trimming its earnings outlook from low- to mid-single digits, to flat to slightly higher.

A company statement said the “bottom-line results were unexpected, and reflect the unusual environment. U.S. inflation levels, particularly in food and fuel, created more pressure on margin mix and operating costs than we expected.”

Walmart stock dropped 6.6% in premarket action. Shares finished Monday up 0.1%. The stock is down from last month’s highs. Shares have an 81 Composite Rating. Their EPS Rating is 79.

Target Earnings

Estimates: Analysts expect Target to earn $3.07 per share, a 20% drop, on revenue of $24.475 billion, up 1%. FactSet forecast a 0.9% same-store sales gain.

Results: Due Wednesday.

Target stock dropped 2.4% early Tursday, after dipping 0.2% on Monday to 219.25. Shares were in a cup-with-handle base with a 254.97 buy point.

The stock has a 90 Composite Rating. Its EPS Rating stood at 90.

Both companies over the years have plowed more money into their e-commerce distribution infrastructure, which helped them tap into a pandemic-driven boom in online shopping. Prior to the results, analysts said they expected strong results from both companies, as higher prices steer customers toward cheaper purchases — particularly as it relates to groceries.

“Walmart is the largest food retailer in the U.S. with a customer base that skews to lower and middle income consumers,” Quo Vadis analyst John Zolidis said in a note. “An environment of higher food prices, fewer stimulus dollars, and increased pressure on certain consumer cohorts should theoretically drive more traffic to WMT stores.”

Cowen analyst Oliver Chen said Walmart was a bit better positioned than Target, citing Walmart’s “grocery-centric diversification.” Walmart’s U.S. business drew more than half of its sales from groceries.

‘Sharp Pricing’

Walmart CFO Brett Biggs, at a conference in March, said the discount giant at that point wasn’t seeing any major shifts in consumer behavior.

“If we did and customers start getting more focused on their own spending, I think we have a lot of things to offer for that customer,” he said.  “We have sharp pricing. We have assortment, one-stop shopping with a Supercenter. If you want to shop online, in stores, delivery, curbside, whatever you want, we’ve got it.”

BMO analyst Kelly Bania, in a note, said Target, whose sales mix leans less on groceries than Target, could be more at risk in the event of a recession.

“That said, a recession likely weighs on discretionary peers more heavily, which could be a catalyst to ignite market share gains longer-term,” she said.

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