Strong Q4 performance, but this year's earnings guidance is "bleak," Walmart plummets 8% in pre-market | Earnings Report Insights

Due to high inflation in the United States, American consumers seeking "cheap goods" flocked to discount retailer Walmart, driving strong revenue growth for the company. However, Walmart's stock price fell in pre-market trading after the company announced revenue and profit guidance for fiscal year 2026 that fell short of expectations.

On Thursday, February 20, Walmart released its fourth-quarter financial report for fiscal year 2025, which showed:

1) Key Financial Data

Revenue: The company achieved revenue of $180.6 billion in the fourth quarter, a year-on-year increase of 4.1%. Total revenue for the year was $681 billion, up 5.1% year-on-year.

Profit: Operating profit in the fourth quarter increased by 8.3% year-on-year to $7.9 billion. Annual operating profit grew by 8.6%.

Gross Margin: Driven by its U.S. operations, Walmart's gross margin in the fourth quarter increased by 53 basis points year-on-year to 23.9%. For the year, it grew by 40 basis points to 24.1%.

Earnings Per Share: Adjusted earnings per share for the fourth quarter were $0.66, exceeding the estimated $0.65.

2) Key Business Revenue Data:

Walmart U.S.: Fourth-quarter net sales were $123.5 billion. E-commerce sales grew by 20%, gross margin increased by 51 basis points, and membership revenue saw double-digit growth, improving the overall business mix.

Walmart International: Fourth-quarter net sales were $32.2 billion. E-commerce sales grew by 4%, and advertising revenue increased by 10%.

Sam's Club: Fourth-quarter net sales were $23.1 billion, with e-commerce sales growing by 24% and membership revenue increasing by 13%.

In terms of comparable sales, U.S. comparable sales (excluding fuel) grew by 4.9%, below the expected 4.66%; Walmart's U.S. stores (excluding fuel) grew by 4.6%, below the expected 4.36%.

Walmart CEO Doug McMillon stated:

"Our momentum comes from low prices, an expanding assortment of products, and e-commerce driven by faster delivery times."

The financial report noted that high-income customers or households with six-figure incomes were the main drivers of market share in the latest quarter, with seasonal goods, automotive, and home products being the most attractive.

3) Performance Guidance:

Due to ongoing pressure on the product mix and economic uncertainty, Walmart's profit expectations for the first quarter and the entire next fiscal year fell short of expectations.

Fiscal Year 2026: Adjusted earnings per share are expected to be between $2.50 and $2.60, below the estimated $2.77. Sales are expected to grow by 3% to 4%, while analysts had anticipated a 4% growth

First quarter: Adjusted earnings per share are expected to be between $0.57 and $0.58, lower than the estimated $0.65.

After the data was released, Walmart's stock fell more than 8% in pre-market trading. It is worth noting that Walmart has performed well since the pandemic, with its stock price nearing historical highs this year and a market capitalization exceeding $800 billion.

Walmart warned that after several quarters of steady growth, inflation-weary consumers are likely to "pull back," leading to a slowdown in sales growth