Walmart Inc. reported a strong fourth-quarter financial performance, with profit and sales beating market expectations. However, lower than expected guidance for fiscal 2026 sent the company's shares down 8% in premarket trading.
Earnings Beat Expectations
Walmart announced earnings per share (EPS) of $0.66, beating analysts' estimates of $0.64. The company's earnings were largely driven by improved profit margins and growth in higher-margin businesses such as advertising (+29%) and membership revenue (+16%).
Besides, U.S. same-store sales rose 4.6%, beating expectations of 4.4%. This suggests that more customers, including high-income earners, are choosing to shop at Walmart.
Walmart's gross profit margin rose 50 basis points to 23.9%, better than market expectations of 23.7%. The increase was driven by better inventory management and fewer markdowns. However, the company's operating expenses increased due to higher marketing costs and increased employee compensation.
Future Outlook Less Satisfactory
Despite the current performance, Walmart issued cautious results for fiscal year 2026. The company expects revenue growth of only around 3%-4%, lower than the market expectation of 4.2%. Operating income is also expected to grow only 3.5%-5.5%, compared to analysts' forecast of 10.3%.
In addition, earnings per share (EPS) for fiscal year 2026 is in the range of $2.50-$2.60, lower than the analyst expectation of $2.77. Factors such as foreign currency fluctuations and the acquisition of technology company Vizio also affected the company's profits.
Dividend Increases, Evidence of Walmart's Confidence
Although the future outlook appears somewhat uncertain, Walmart still made a bold move by increasing its annual dividend by 13%, the largest increase in over a decade. This move is not only a token of appreciation to shareholders, but also reflects the company's confidence in the stability of its cash flow. In a challenging economic environment, this result shows that Walmart remains strong and committed to providing continued returns to its investors.
Conclusion
While investors are less confident about the future, Walmart still has advantages in high-margin businesses such as advertising and membership programs. With a strong business model and a clear strategy, the company is expected to continue to grow in the long term.
Shahriena Shukri is a journalist covering business and economic news in Malaysia, providing insights on market trends, corporate developments, and financial policies. More about Shahriena Shukri.
