Walmart Inc. reported better-than-expected first-quarter results on Thursday, but a cautious outlook for the current quarter and rising fuel costs weighed on investor sentiment, sending shares roughly 2% lower in premarket trading.
The retail giant posted net revenue of $177.8 billion for the three months ended April 30, a 7.3% increase from the prior-year period, topping analyst forecasts. However, management projected second-quarter sales and profit would fall short of Wall Street expectations, citing persistent inflationary pressures and higher fuel expenses that are squeezing both consumers and the company's margins.
Walmart's U.S. comparable-store sales rose 4.1% in the quarter, beating the 3.8% consensus estimate compiled by LSEG. E-commerce sales in the U.S. jumped 26%, driven by faster delivery options, expanded advertising revenue, and growing traction in the company's third-party marketplace. Despite the top-line strength, operating income was negatively impacted by approximately 250 basis points—or 2.5 percentage points—due to higher fuel costs, as Walmart absorbed a greater share of delivery and fulfillment expenses to keep prices stable for shoppers.
CEO John Furner, who took the helm on February 1, described the quarter as one of execution rather than simply benefiting from struggling competitors. "Better shopping experiences, a broader assortment, and faster delivery" were key drivers of the results, Furner said in a statement.
For the full fiscal year, Walmart maintained its previous guidance, expecting net sales growth of 3.5% to 4.5% and adjusted earnings per share between $2.75 and $2.85, excluding certain items. That outlook aligns with analyst expectations. However, the second-quarter forecast was notably softer: the retailer projects net sales growth of 4% to 5% and adjusted EPS of 72 to 74 cents, below the 5.09% sales growth and 75 cents per share that analysts had anticipated.
The cautious guidance reflects ongoing headwinds from elevated fuel prices, which have topped $4 per gallon in many parts of the U.S., and stubborn inflation that continues to strain household budgets. Walmart noted that consumers are "feeling some pressure," though sales remained robust. The company's value proposition appears to be resonating with price-conscious shoppers, a trend that Morningstar analyst Brett Husslein highlighted. "When the economy is hurting or people feel like their wallet is stretched, they go to Walmart," Husslein told Reuters.
In the broader retail landscape, Walmart's performance stands out. Target lifted its annual sales outlook after reporting stronger first-quarter sales, but remained cautious on the consumer outlook. Similarly, Kroger and Albertsons have kept conservative guidance for the year, even as rivals post gains. Competitors are signaling some improvement, though from weaker positions.
Analysts at Oppenheimer pointed to higher fuel costs as a key risk for Walmart, while Morgan Stanley, ahead of the results, said the retailer benefits from price-conscious shoppers and its pricing edge. The risk, however, is that the fuel shock could push more shoppers to Walmart while also pressuring margins and stretching lower-income customers. Husslein described the current environment as a "capital-intensive e-commerce arms race" for Walmart, with little room for error given investor expectations for continued growth.
For now, Walmart continues to gain market share. Investors are weighing whether larger sales volumes, faster delivery, and higher-margin areas like advertising and membership programs can offset the costs of serving a more cautious consumer base.
