Walmart is following a bad example, but useful
What is an bad but useful example?
Facebook($Meta Platforms(META)$ ) has set an example quarters ago. When everybody was questioning how deep the macro and industrial environment could influence the company, Muck Zuckerberg just put rotten, lowered the guidance and avoided any negative questions, and talked much about how the metaverse future could be no matter whether it was practical. Then the market bought, Facebook stock price just stop plunging, just put back and forth.
It seems like, in this quarter, the performance are no longer the domination of stock price, investors' estimate do.
On Tuesday, An unsurprisingly beat on Q2 earnings, and a profit guidance lift from $Wal-Mart(WMT)$ helped it and the retail sector outperform, even made $DJIA(.DJI)$ index above the water. While the retail giant just issued a profit warning last month due to concerns over consumer spending.
Reference: Down 10% In Post Trading, Why Walmart Lowered Earnings Guidance Again?
Lets compare the Q1 and Q2's surprise towards the estimate
In Q2, Walmart Non-GAAP EPS $1.77, beats by $0.17. Revenue $152.6B (+8.2% Y/Y) beats by $2.64B. While U.S. comp sales grew 6.5% and 11.7% on a two-year stack. eCommerce growth was 12% and 18% on a two-year stack.
Apparently, when the estimate set lower, a positive surprise presents, and lift investors' confidence.
What's interesting, Walmart executives said,
It was seeing a trade-down effect with shoppers at the higher income levels buying more groceries from Walmart.
A quarter ago, when WMT was suffering from heave inventories, some other peers, for instance, $Macy's(M)$ , $Nordstrom(JWN)$ just showed perfect earnings, which made investors believe ther higher income consumers are still active, WMT's dilemma just individual dilemma.
Now, if WMT is welcoming back those consumers, the other groceries's earings become interesting.
At least now, if Walmart's inventory and markdown issues were under control, there must be more upside than downside for the near-term.
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