Walmart Inc. shares extended their decline in after-hours trading on Friday, shedding approximately 1.5% to close at $122.99. The move followed the retail giant's quarterly earnings report, which included a cautious profit forecast for the coming years, and was compounded by a notable analyst downgrade from HSBC.
Guidance and Analyst Action Weigh on Sentiment
The company projected its adjusted earnings per share for fiscal year 2027 to be in a range of $2.75 to $2.85. Concurrently, Walmart's board authorized a new $30 billion share repurchase program and approved a 5% increase in its annual dividend, raising it to $0.99 per share for fiscal 2027, with quarterly payments of $0.2475. The record date for the next dividend is March 20, with a payout scheduled for April 6.
Despite these shareholder-friendly announcements, HSBC downgraded Walmart's stock rating from "buy" to "hold." While the firm raised its price target to $131 from $122, analysts expressed concern that the stock's current premium valuation limits potential upside, especially if the operating environment faces challenges. They noted that Walmart's valuation gap with competitor Costco is narrowing.
Quarterly Performance and Consumer Insights
For the fourth quarter, Walmart reported revenue of $190.7 billion, a 5.6% increase year-over-year. Adjusted earnings per share came in at $0.74. U.S. comparable sales, excluding fuel, rose 4.6%, while U.S. online sales surged 27%.
On a conference call with analysts, CEO John Furner highlighted ongoing pressure on lower-income consumers, stating that for shoppers with household incomes under $50,000, "wallets are stretched." However, the company's scale continues to provide an advantage in e-commerce, a segment where some rivals have struggled to maintain momentum with higher-priced items.
Broader Market Context and Implications
Walmart's cautious tone carries significant weight for investors, as the retailer is often viewed as a bellwether for U.S. consumer health. The guidance raises questions about whether consumers are trading down to cheaper alternatives or pulling back on spending altogether, which could pressure retail sector margins.
The stock's decline occurred even as the broader market finished higher, buoyed by a Supreme Court decision that removed a set of Trump-era tariffs, reducing trade policy uncertainty. Investors continue to navigate a landscape of moderating growth and persistent inflationary signals.
Looking Ahead
The market's focus in the coming week will be on interpreting whether Walmart's guidance is prudently conservative or a genuine warning sign on consumer demand. Traders will also monitor the pace of the newly authorized buyback program. Macro-sensitive retail stocks face another test with the upcoming Federal Reserve policy meeting on March 17-18, which could provide further direction on interest rates and economic outlook.
Walmart's performance underscores the delicate balance retailers must strike in an uncertain economic climate. Its ability to maintain low prices may be tested if hiring softens or costs—such as tariffs, shipping, or wages—rise anew. In such a scenario, investors may shift their focus from the stock's growth potential to the sustainability of its current valuation.
