[Asia Economy New York=Special Correspondent Joselgina] Walmart, the largest US big-box retailer, and home improvement retailer Home Depot have issued cautious forecasts regarding their performance this year. They warned that a slowdown in consumer spending could lead to deteriorating results.
On the 21st (local time), Walmart announced in its earnings report that its earnings per share (EPS) for the next year through January 2024 are expected to be between $5.90 and $6.05. This is below Wall Street’s consensus estimate of $6.50, compiled by financial information firm Refinitiv. John David Rainey, Walmart’s Chief Financial Officer (CFO), said, "Consumers are still under pressure," adding, "Economic indicators show balance sheets shrinking and savings rates falling. This is why we are taking a very cautious outlook this year."
Walmart’s fourth-quarter results (November 2022 to January 2023) released that day exceeded Wall Street expectations. Quarterly EPS was $1.71, surpassing the forecast of $1.51, and revenue also beat expectations at $164 billion. However, the company emphasized the possibility that consumer spending could slow significantly this year due to ongoing macroeconomic uncertainties such as high inflation and interest rate hikes. Walmart also forecasted first-quarter EPS of $1.25 to $1.30, below the market estimate of $1.37.
Home Depot, which also released earnings on the same day, projected almost no revenue growth for fiscal year 2023. Operating margin was expected to be about 14.5%. The company explained that this reflected investments including $1 billion for wage increases. Home Depot announced it would spend an additional $1 billion to raise hourly wages for employees working in stores across the US and Canada. While this measure aims to prevent staff turnover amid labor shortages, these labor costs inevitably appear as expenses on the books.
Home Depot’s fourth-quarter results last year were mixed. Revenue was $35.83 billion, slightly below Wall Street’s consensus of $35.97 billion. Due to soaring inflation and a housing market downturn, this marked the first time since November 2019 that the company’s quarterly revenue fell short of Wall Street’s expectations. However, EPS was $3.30, exceeding the forecast of $3.28.
With these two major retail chains, which serve as indicators of US consumer outlook, issuing disappointing earnings guidance, the market has widely interpreted this as signaling a challenging year ahead for the retail industry. On the New York Stock Exchange that day, Home Depot’s stock price slid more than 7% compared to the previous session. Walmart, which had been declining in pre-market trading, later turned slightly positive and closed flat.
Economic media outlet CNBC commented, "Walmart and Home Depot are preparing for a consumer downturn," adding, "Department store chains like Macy’s and Nordstrom, which are heavily weighted toward discretionary goods such as apparel, handbags, and shoes, could be in an even tougher position." These department store chains are scheduled to announce their fourth-quarter earnings next week.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
