Walmart shares are down about 6% in the morning after warning that inflationary pressures may weigh on its adjusted earnings per share in 2025.
Economists worry that Trump’s tariffs could spark a trade conflict, which will in turn lead to a resurgence of inflation in the United States.
Consumer prices have already risen more than expected for January.
WMT is well positioned to handle such challenges.
Why Walmart may not be at risk from inflation
Walmart may be able to manage inflationary headwinds in the Trump administration, as it has gained popularity among wealthy households.
In the third quarter of the company’s financial year, the group with incomes above $100,000 accounted for three-quarters its market share gains.
This is important for WMT, as households with higher incomes are generally more resistant to inflation.
They have more income and savings to absorb the increase in costs of goods and service.
Plus, wealthy shoppers have a diversified portfolio of investments, which can offer some protection against inflation.
John Furner, the US chief executive of Walmart Inc., is confident that higher-income households will stay this time, as online shopping with Walmart allows them to save time and money.
WMT is more than a retailer anymore
Walmart stock could be poised to gain more in the face inflationary pressures, as it has been investing aggressively in order to become a platform.
The multinational has established a burgeoning business in advertising. The high-margin business could help offset any weakness in the company’s brick-and mortar retail business, despite the expected rise in consumer prices.
The retailer could also tap into private label products, especially upscale brands like Bettergoods, in order to maintain its position despite potential inflationary pressures by 2025.
WMT shares are still attractive to investors despite the exceptional bull run of the past 12 months. They also pay a current dividend yield of 0.80%.
Walmart Q4 earnings highlights
Walmart Inc. reported earnings of 66 cents per share on revenue of $180.55 Billion for its fourth fiscal quarter.
John David Rainey, the WMT chief executive, said that the company would shift its supply to take advantage of lower prices. This will then be passed on to the consumers.
Investors should note that the big-box retailer has a long history of providing conservative guidance at the beginning of its financial year.
Wall Street’s consensus rating for WMT shares was “buy” prior to the earnings announcement.
Analysts’ average price target for Walmart stock is $108 at the time of writing, which indicates a potential upside of more than 10% from current levels.
This post Concerns about inflation hurting Walmart is overblown: Here’s why could be modified as new developments unfold.
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