Walmart Stock Slides: What's Behind the Decline?

Walmart's stock has been on a downward spiral, and investors are wondering what's driving the decline. The retail giant reported a 4.1% year-over-year increase in revenue for the fourth quarter of fiscal 2025, but net income dropped from $5.7 billion to $5.3 billion. This decline can be attributed to higher costs of sales and operating expenses, which rose by 3.3% and 6.5% year over year, respectively. Management pointed to growing e-commerce sales, which now make up 18% of Walmart's net sales, as a significant contributor to these increased expenses. Despite these challenges, Walmart's management remains cautiously optimistic for its fiscal year 2026, indicating that the company is taking steps to address these issues and improve its financial performance.



Historically, walmart has shown resilience in the face of economic challenges. For instance, the company generated revenue of $611.289 billion in 2022, and its e-commerce sales surged by 17% within the last three months of 2022. This growth in e-commerce sales is a testament to Walmart's ability to adapt to changing consumer preferences and market conditions. Additionally, Walmart has a strong track record of returning capital to shareholders through quarterly dividends and share repurchases. The company holds the prestigious title of Dividend King, signifying that it has not only paid but also increased its dividend for at least 50 consecutive years. Its most recent dividend hike was an impressive 13%, bringing the quarterly payout to $0.235 per share. This translates to an annual yield of 1.1%, and the company has a relatively low payout ratio of around 34%, meaning future increases likely won't pressure the company's other goals.

In comparison to historical trends, the recent decline in Walmart's stock price is a temporary setback in an otherwise strong performance. The company's ability to adapt to changing market conditions and its commitment to returning capital to shareholders are key factors that have contributed to its long-term success. As Walmart continues to invest in e-commerce and supply chain automation, it is well-positioned to overcome the current challenges and maintain its status as a leading retailer.



Walmart's current financial health, including revenue growth and profit margins, can be compared to its competitors, particularly Amazon, to understand its stock performance implications. Walmart reported an incredible $180.6 billion in revenue for the fourth quarter of fiscal 2025, representing a 4.1% year-over-year increase. However, the retailer saw its net income decrease from $5.7 billion to $5.3 billion. This decrease in net income can be attributed to higher costs of sales (up 3.3% year over year) and higher operating, selling, general, and administrative expenses (up 6.5% year over year). Management pointed to growing e-commerce sales, which now make up 18% of Walmart's net sales, and cost more than its traditional brick-and-mortar stores. In the long term, management believes that supply chain automation will improve those expenses.

In contrast, Amazon, one of Walmart's main competitors, generated a staggering $117.7 billion in revenue from its third-party store alone. Amazon makes a bigger profit on each item they sell compared to Walmart, which translates to potentially higher overall profits if they can streamline their operations. Amazon also relies less on debt financing, which reduces its exposure to financial risk in the long run.

Walmart excels at turning sales into profit, even though their profit margin per product is lower than Amazon’s. They earn less profit on each product they sell compared to Amazon, and this could limit their overall profitability potential. Walmart relies more heavily on debt financing, which increases its long-term financial risk if not managed carefully.

Despite operational efficiency challenges, Amazon’s significantly higher gross profit margin offers them more potential for overall profitability once they improve their operations. Additionally, their lower debt ratio indicates a less risky financial position in the long term.

For Walmart, the implications for its stock performance are mixed. While the company continues to grow, profitability lags, which could be a concern for investors. However, Walmart prioritizes returning capital to shareholders through quarterly dividends and share repurchases. The company holds the prestigious title of Dividend King, signifying that it has not only paid but also increased its dividend for at least 50 consecutive years. Its most recent dividend hike was an impressive 13%, bringing the quarterly payout to $0.235 per share. This translates to an annual yield of 1.1%. The company also has a relatively low payout ratio at around 34%, meaning future increases likely won't pressure the company's other goals.

Walmart allocated $4.5 billion to share repurchases in fiscal year 2025, using a tax-efficient method of returning capital to shareholders. With $12 billion still available under its current repurchase program, management will likely continue further lowering its outstanding shares, which have declined 17% over the past decade.

In summary, while Walmart's revenue growth is positive, its profit margins and increasing expenses are areas of concern. Compared to Amazon, Walmart's financial health shows a higher reliance on debt and lower profit margins per product. However, Walmart's commitment to returning capital to shareholders and its status as a Dividend King could mitigate some of these concerns for investors.