Walmart‘s stock plunged on Thursday after the retail giant revealed a disappointing full-year forecast, as high gas prices eat into shoppers’ wallets.
The Bentonville, Ark-based big box retailer said it expects adjusted earnings per share of $2.75 to $2.85, and a net sales jump between 3.5% and 4.5% for the year.
After the guidance disappointed investors last year when it was initially released, analysts had estimated Walmart would hike its adjusted earnings forecast to $2.91 a share.
It’s just the third time in the past 16 quarters that Walmart did not beat its earnings expectations – sending shares in the retailer down 7.7% in early trades on Thursday.
For the current quarter, Walmart said it expects adjusted earnings per share of 72 cents to 74 cents, also missing expectations of 75 cents, and a net sales increase of 4% to 5%.
Walmart CFO John David Rainey told CNBC that consumers might feel more strain in the second quarter as cushioning from higher tax returns wears off.
“I think higher tax returns muted some of the pressure related to higher fuel prices and as we’re in a period of time right now where those tax refunds are largely not coming in, I think consumers are going to feel more of that pressure from higher fuel prices,” Rainey said.
Major retailers have been staring down a difficult economic mix, as fears around the Iran war and tariffs have sent consumer sentiment plunging to fresh record lows.
The war’s severe energy supply disruption has pushed national average gasoline prices to $4.56 a gallon, according to AAA – a more than 50% premium over pre-war costs.
Americans are also dealing with years of sticky inflation, high interest rates and housing shortages – all of which have made it more difficult for retailers to win back their wallets.
Budget retailers and fast-food chains have nodded to a so-called K-shaped economy, meaning they have noticed a split among customers.
Higher-income consumers have been benefitting from stock market gains and higher wages, so they are more willing to spend, while lower-income shoppers have been hit harder by inflation.
Walmart’s global e-commerce sales business emerged as a bright spot, rising 26% in the first quarter, along with its worldwide advertising division, which shot up 37%.
Rainey also defended the company’s second-quarter forecast, saying its operating income expectations are the highest they’ve been in about a decade-and-a-half – despite suffering a massive $175 million headwind from surging fuel costs amid the Iran war.
“It’ll probably be larger than that in the second quarter if fuel prices stay where they are, so we’re absorbing those prices and still maintaining our guidance, and I feel really good about that,” Rainey told the outlet.
Meanwhile, Walmart’s sales in the first quarter were relatively strong. The budget retailer has long catered to low-income consumers, but it has also won over higher-income shoppers in recent years – a mixed customer base that has allowed it to weather concerns around tariffs and gas prices.
Sales jumped to $177.8 billion in the first quarter – up 7% from $163.98 billion the previous year. Same-store sales also rose 4.1%.
