Walmart Shares Sink on Soft Sales Forecast. Is It Time to Buy the Stock on the Dip?

Walmart (WMT) shares tumbled on Thursday after the retail giant provided a 2025 sales and profit forecast that was lower than analysts had expected, with executives warning about new challenges in an uncertain economic landscape. Walmart's stock fell nearly 6% at last check, making it the worst Dow Jones stock of the day. The outlook from the nation's largest retailer for 2025 is as much as 27 cents below analyst projections for per-share earnings and for the quarter, Walmart's expectations are as much as 7 cents below Wall Street projections.

Walmart expects first quarter earnings per share of between 57 cents and 58 cents, well below the 64 cents Wall Street was expecting, and for the year. Walmart expects earnings per share in the range of $2.50 to $2.60. That's also off the $2.77 that analysts are predicting, according to FactSet. It forecast a 3% to 4% increase in quarterly sales or between $166.35 billion and $167.97 billion. That could be a letdown for industry analysts, who had expected sales of $167.05 billion, according to FactSet. Walmart expects sales to be up anywhere between 3% to 4% for the current year, or between $667.57 billion and $674.05 billion. That too falls short of the $708.72 billion that analysts predicted, according to FactSet.

Walmart's conservative sales forecast for fiscal 2026, which expects net sales to grow 3% to 4% and adjusted operating income to grow between 3.5% to 5.5% on a constant currency basis, falls short of analysts' expectations. According to FactSet, analysts were predicting net sales of $708.72 billion and adjusted earnings per share of $2.77 for the year. Walmart's guidance for net sales is between $667.57 billion and $674.05 billion, and for adjusted earnings per share, it is between $2.50 and $2.60.

Several factors contribute to the discrepancy between Walmart's forecast and analysts' expectations:

1. Tariff risks: Walmart's CFO, John David Rainey, acknowledged that tariffs on imports from Mexico and Canada could impact the company's sales and profitability. Although Walmart has hedged against some tariff threats, the uncertainty surrounding potential tariffs may contribute to the company's conservative outlook.
2. Consumer spending patterns: Despite describing consumer spending patterns as "steady," Rainey acknowledged the uncertainty in the geopolitical landscape. A potential slowdown in consumer spending could negatively impact Walmart's sales, as the company is heavily reliant on consumer spending for its revenue.
3. Inventory levels: Walmart's inventory levels have been a concern for some analysts, with the company holding more inventory than it needs. This could lead to markdowns and reduced profitability, contributing to the company's conservative sales forecast.
4. Competition: Walmart faces intense competition from other retailers, such as Amazon, Target, and Costco. As these competitors continue to innovate and grow, they may capture a larger share of the market, impacting Walmart's sales growth.
5. Economic uncertainty: The global economic outlook is uncertain, with potential headwinds from sticky inflation, high debt levels, and a suppressed housing market. This uncertainty could lead to a pullback in consumer spending, negatively impacting Walmart's sales.

In an interview with CNBC, Rainey stated, "We have to acknowledge that we are in an uncertain time, and we don't want to get out over our skis here." This uncertainty, coupled with the factors mentioned above, contributes to Walmart's conservative sales forecast for fiscal 2026.



Despite the soft sales forecast, Walmart's dividend growth strategy remains a strong selling point for the company. Walmart has consistently raised its dividend for 52 consecutive years, making it one of the best dividend growth stocks. This strategy signals confidence to investors that Walmart's financials are sound and that the company is committed to returning value to shareholders. Dan Burrows, senior investing writer at Kiplinger, highlights the importance of dividend growth in his feature, "Best Dividend Stocks to Buy for Dependable Dividend Growth." He notes that shares in companies that raise their payouts like clockwork decade after decade can produce superior total returns (price change plus dividends) over the long run.



In conclusion, while Walmart's conservative sales forecast for fiscal 2026 may be cause for concern, the company's dividend growth strategy remains a strong selling point. Investors should carefully consider the potential risks and opportunities before making a decision to buy, sell, or hold Walmart stock. As always, it is essential to consult with a financial advisor or conduct thorough research before making any investment decisions.