Why Walmart shares fell 6% at open today

What happened

Retail juggernaut stocks Walmart (NYSE: WMT) fell rapidly 6% when markets opened on February 18. The big news was the release of its results, which was somewhat mixed. Overall, however, it seems Wall Street’s initial reaction was negative.

So what

Walmart reported record sales of $ 152 billion in the fourth quarter of fiscal 2021, up just over 7% year-on-year. Comparable store sales of its namesake store increased 8.6% with strength in most of the company’s product categories. Online sales increased by just under 70%. The company’s Sam’s Club warehouse business saw same-store sales increase 10.8%, with online sales increasing just over 40%. International sales increased 6.3%, after adjusting for currency volatility. Adjusted earnings, which remove one-off items, stood at $ 1.39 per share, below consensus analysts’ estimates of $ 1.51. For the full year, the company’s adjusted profit was $ 5.48 per share, up from $ 4.93 a year earlier, on a 6.7% increase in sales . There were some positives to that, but investors generally don’t like a shortfall.

Image source: Getty Images.

This was complicated by two other problems. First, Walmart’s stock has done pretty well since the lows it hit in April 2020, rising more than 30% at one point. This lags behind the broader market, but Walmart is a slower and more consistent player than a growth stock. So investors seemed to have incorporated a fair amount of good news. And then there’s Walmart’s outlook for fiscal 2022, which was less than inspiring. He predicts an overall decline in the company’s sales, including the impact of divestitures. But even excluding this factor, sales are only expected to increase in low numbers. This is the basic presumption in all of its major business units. Profits, excluding disposals, should be stable or slightly higher. In other words, the coming year will probably be “meh” at best. Wall Street tends to look to the future, so it’s no shock that the stock fell in this update, especially when you add it to the missed gains.

Now what

Walmart also announced that it had increased its dividend by 2%. This is good news, but the change hasn’t been huge. The real purpose of the hike was to show that investors can still count on the retail giant to reward them over time with a consistent and growing dividend. And that perhaps sums up the story of Walmart. It has fundamentally developed over many years to become a retail industry indicator, a fact that investors seem to be realizing again now that the increase in sales linked to the coronavirus is starting to fade. Indeed, it should be noted that the return of around 1.5% that the stock is offering today is slightly lower than what you would get from a S&P 500 Index funds.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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About Pia Miller

Pia Miller

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