Walmart Investor Day Will Provide the Latest Snapshot on Consumer Health

Yet after a year of big guidance cuts and worrisome announcements from retailers, investors may feel more at ease if fewer headline-worthy updates come out of the meeting.

In June 2022, Walmart’s annual shareholder meeting proved to be the calm before the storm. The company tried to allay fears in the wake of its lowered forecast a month before. But it ultimately had to follow the lead of fellow big box store
Target
(TGT)—which sparked its own industrywide selloff by cutting its guidance twice in three weeks—with its own lowered outlook in July.

Today, Walmart is once again working in the shadow of weaker guidance, and conflicting data points about various parts of its business.

Nonetheless the situation seems much less dire.

“While it feels early for a guidance raise…we expect to hear about a good start [as] the first quarter looks to be shaping up as a good quarter,” writes
Wells Fargo
analyst Edward Kelley. “Walmart remains a strong idea in an uncertain backdrop.”

Indeed, during a brutal 2022 Walmart held up better than many of its peers, and the shares are off just over 2% over the past year, compared with an 18% decline for the
SPDR S&P Retail ETF
(XRT). Yet the stock is up only 4% since the start of 2023, trailing both the XRT and
S&P 500’s
gains, as more confident investors ventured out from the safe haven positions they took during the market’s turmoil.

Still,
Oppenheimer’s
Rupesh Parikh is similarly bullish, calling any postmeeting selloff a buying opportunity—a possibility given that in recent years analyst days have been a mixed bag in terms of moving the stock.

That said, he also thinks Walmart will likely stick with its conservative outlook: “Overall, we expect an upbeat tone from management on the underlying drivers of the business and believe the company is likely to reiterate fiscal 2023 guidance and long-term targets for 4%-plus sales growth and operating income growth ahead of sales growth.”

That strategy makes sense, given the company’s—and other retailers’—need to abruptly lower investor expectations in mid-2022. Better to still under-promise and then eventually over-deliver if things continue to go well.

After all, hopes remain that the U.S. will avoid a recession, and many higher-income Americans are the ones feeling the brunt of layoffs. But stubbornly high inflation has had the biggest impact on Walmart’s core customers, particularly as more generous pandemic-era federal food aid ends, making essentials even more expensive for the most vulnerable households.

On that score, RBC Capital Markets’ Steven Shemesh argues that Walmart is operating from a position of strength. In his monthly price comparison between Walmart and Target he found that the total for basket of core consumer goods fell 4.1% in March from February at the former and rose 2.9% at the latter.

Shemesh writes that the divergence comes from generous promotions Walmart ran on
Procter & Gamble’s
(PG) Tide laundry detergent and
Clorox
(CLX) disinfecting wipes.

“Normally, we wouldn’t try to draw any real conclusions from product-level promotions like this, but given that these are large (seemingly nationwide) promotions on two of the top five purchased [products] in the home care category, it seems a bit more tactical…Data suggest that Walmart traffic has held up, so we suspect this is more of an offensive move,” Shemesh wrote.

That could make things tougher for competitors. As long as Walmart remains laser focused on pricing, it is hard for rivals to pass through higher costs to their own customers.

In the end, what Walmart says about the health of the consumer, along with key retail issues such as the state of freight, labor, and commodity costs, will provide crucial insight for a sector still struggling in inflation’s grip—and seesawing retail sales.

Yet after a tumultuous 2022, some investors may feel the more boring the better.

Write to Teresa Rivas at [email protected]