what happened
Shares retail juggernaut Walmart (NYSE: WMT) opened rapidly 6% with the opening of trading on 18 February. The big news was the release of the earnings, which was a mixed bag. Overall, however, Wall Street’s initial response appears to have been negative.
Approximately
Walmart reported a record $ 152 billion in revenue in the fourth quarter of fiscal 2021, up slightly more than 7% year-on-year. The comparative store sales in its namesake store increased by 8.6% with the strongest in most of the company’s product categories. Online sales increased by only 70%. The company’s warehouse store Sam’s Club increased comparable store sales by 10.8% with online sales rising just over 40%. International sales increased by 6.3%, adjusted for currency volatility. The adjusted earnings, which include one-off items, are $ 1.39 per share, which does not underestimate the $ 1.51 consensus estimate. For the full year, the company’s adjusted earnings were $ 5.48 per share, compared to $ 4.93 a year earlier, at a 6.7% increase in revenue. There have been positive things, but investors usually do not like an earnings.
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This has been complicated by two other issues. First, Walmart’s share has performed fairly well since the lows it reached in April 2020, rising by more than 30% at some point. This is the broader market, but Walmart is slower and more stable than a growth stock. So it looks like investors have priced in a fair amount of good news. And then there is Walmart’s prospects for fiscal 2022, which were less than inspiring. It is predicted that the sales of the business will decline overall, including the impact of repulsion. But even excluding the factor, sales are expected to rise only in the low single digits. This is the basic assumption in all its major business units. The expectation is that earnings, excluding sales, will be flat to slightly higher. In other words, the coming year will probably be ‘meh’ at best. Wall Street tends to look ahead, so it’s not shocking that the stock fell on the update, especially if you’re earning it with the earnings.
Now what
Walmart also announced that it has increased its dividend by 2%. This is good news, but the change was not big. The real point of the hike was to show that investors can still rely on the giant retailer to reward them with a constant and growing dividend over time. And that might sum up the story of Walmart. It has basically grown over many years into a slow-moving retail industry, and it seems that investors are once again realizing that the sales increase associated with the coronavirus is starting to fade. It is indeed noteworthy that the return of approximately 1.5% offered by the stock today is slightly lower than what you would get from a stock S&P 500 Index fund.