BREAKINGVIEWS-Walmart drops bag of fear into trolley of greed

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Jennifer Saba

NEW YORK, Feb 20 (Reuters Breakingviews) - Walmart’s WMT.N basket is full, but investors are seeing it half-empty. The $780 billion retailer unveiled strong sales through the holiday season and into January, boosted by wealthier shoppers looking for discounts. It also flagged potential worries about inflation weighing on consumers, which deflated its equity value by 6%. It’s the latest sign that economic exuberance ushered in by President Donald Trump’s election victory is fading.

The company said on Thursday that U.S. stores open at least a year increased sales 4.6% for the three-month stretch ending on January 31. The final month of the period was also the strongest. Walmart ticked boxes elsewhere, too. Its e-commerce revenue jumped 16%, double the pace of Amazon.com’s AMZN.O online growth. For the year, the bottom line also grew five times faster than the top line.

After Trump won the White House, Walmart’s stock since soared by 25%, outperforming the broader market. It propelled the enterprise’s valuation past Amazon’s, to 19 times EBITDA for the next 12 months EBITDA. Its edge against rivals stems from the ability to keep attracting customers in an inflationary environment and stocking plenty of food.

Even Walmart isn’t fully insulated from economic concerns, however. The company led by Doug McMillon expects full-year sales to rise between 3% and 4%, a slight hedge against the 4% analysts were expecting. An acknowledgement of “uncertain times” explains the measured forecast and contributed to the swift loss of about $50 billion in market capitalization.

As a bellwether of U.S. spending habits, Walmart’s ambivalence is significant. Trump already conceded that “inflation is back” and consumer assessments of business and labor conditions fell sharply in January, according to The Conference Board research outfit.

Wall Street is having its doubts, too, evidenced by this week’s warning from David Kelly, the chief global strategist at JPMorgan Asset Management, to consider “the potential downside to economic growth from a tidal wave of new Washington policies.” The president’s threats over tariffs and deportations, in particular, loom large. If Walmart is getting even a little skittish, fear will seep further into the pervasive sentiment of greed.

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CONTEXT NEWS

Walmart said on February 20 that sales at U.S. stores open for at least 12 months increased 4.6% in the three-month period ending January 31 from the same span a year earlier. Total revenue grew 4.1%, to $181 billion.

The owner of its namesake and Sam’s Club stores said it expects sales to rise 3% to 4% for the full year and adjusted earnings per share between $2.50 to $2.60.

Walmart shares were down more than 6%, to $97.42 apiece, at 1115 EST.