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If Walmart Can’t Figure Out the Economy, How Can Anyone Else?


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Robyn Beck / AFP via Getty Images

In many meteorologically lively parts of the world, locals are fond of telling visitors, ‘if you don’t like our weather, wait a few minutes.’ The same could be true of retail earnings.

On Tuesday,
(ticker: WMT) stock soared after the company’s earnings smashed expectations. The retail giant’s fiscal-third-quarter earnings and revenue—at $1.50 a share and $152.8 billion, respectively, handily beat analysts’ expectations. But that isn’t the only factor behind the stock move: The company offered a marked change in tone from just a few months ago.

In May, Walmart’s fiscal first quarter was disappointing and included a modest cut to full-year guidance. The company felt comfortable enough with that outlook to make no changes at its June investor day (a stark difference from big box rival Target’s (TGT), cut to its profit outlook around that time). Then just over a month later, Walmart drastically slashed its forecast. A few weeks on, it tweaked that guidance higher again, with its second-quarter results.

Now there is only one quarter left in the company’s fiscal year, the key holiday season, and Walmart once again boosted its forecast. The retailer now thinks adjusted earnings, excluding divestitures, will be down just 5% to 6% year over year, roughly half the decline it had warned of in July. That news, combined with a big share $20 billion repurchase announcement, sent the shares climbing more than 7%.

Walmart’s improved outlook isn’t shocking: As Barron’s noted, expectations were fairly high heading into the quarter. While high consumer prices have disproportionately hurt the store’s core lower-income shoppers, record-level inflation means that even more Americans are belt-tightening and bargain hunting—a boon for discounters with a reputation for value like Walmart.

What is most notable is how whipsawed the news from retailers has been—and the fact that even the biggest has been caught off guard multiple times and had to introduce sizable forecast changes.

Bulls will argue it was prudent for Walmart to offer a conservative outlook after consumer behavior changed so rapidly in the face of decades-high inflation this spring. That’s certainly true—in general, and in light of how badly investors reacted to Target’s more closely timed pair of guidance cuts.

However it’s also indicative of just how uncertain the economic situation has been the past two quarters. Walmart’s new strong outlook dovetails with cooling inflation numbers; a 7.7% rise in consumer prices as of October is still quite a strain on many Americans, but perhaps not as dire as bears feared. Walmart said its inventory glut is easing too—an indication that the company has right-sized its merchandise and also that shoppers are willing to spend at least a bit beyond the bare necessities.

Ultimately we could be gearing up for a better reporting season ahead than we’ve had in the past two quarters. Walmart is a bellwether for the industry; if it sees reasons for optimism and less need to discount, that’s likely to have ripple effects among other retailers.

At the same time, it isn’t as if inflation has disappeared. The company did note weaker sales in areas like home goods, electronics, and apparel—categories that outperformed in the pandemic but have become an albatross for retailers more recently.

For now, all this means that “better” is a relative term. But the one thing that that has been true throughout is how wildly the picture of consumer health and spending has fluctuated in recent months. If the world’s largest retailer can’t get a consistent read on what shoppers are doing, it’s no wonder then that the market hasn’t either.

Write to Teresa Rivas at


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