Walmart’s 2024 Journey: Insights on Consumer Confidence and Tariff Challenges Ahead

Walmart just posted another strong year of sales and profits, mainly because its low prices attract shoppers worried about inflation. However, there are some jitters about the future of American shoppers and how tariffs might affect prices in 2025.

Walmart’s latest financial forecast isn’t as upbeat as analysts hoped. The company expects profits to be up to 27 cents lower per share than predictions, causing its stock to drop over 6% right at the start of trading. Sales projections are also less optimistic, suggesting that rising costs might make shoppers less eager to spend.

In an interview, Walmart’s CFO John David Rainey described shoppers as cautious but still resilient. He noted that despite concerns over tariffs, consumer behavior hasn’t shifted significantly yet.

Rainey pointed out that there’s still a lot of uncertainty in the market. “We are only one month into the year, and there’s much we don’t know,” he said, referring to the potential impact of new tariffs.

While Walmart hasn’t included tariffs in its predictions, Rainey acknowledged that the company could still feel their effects. “We’re going to work really hard to keep prices low for our members and customers,” he said. To do this, Walmart is adjusting its sourcing strategies. For instance, the company is looking for alternatives for microwave ovens because of rising tariffs on aluminum and steel, though some products might still see price hikes.

Concerns about tariffs have also led to some hesitance among shoppers in Walmart’s Mexican operations. Luckily, Walmart is in a good position, with two-thirds of its products sourced in the U.S., primarily groceries, which make up about 60% of its U.S. sales.

Despite the challenges, Walmart’s stock took a hit, and other retailers’ shares dropped too. As one of the first major U.S. retailers to report their results, Walmart’s numbers can give us insight into how American consumers are feeling. Over the past year, shoppers have focused more on necessities instead of big-ticket items like TVs or furniture, largely due to rising costs.

Walmart has gained market share during this time, especially among households earning over $100,000. Its e-commerce growth and membership program, Walmart +, have attracted more affluent customers. CEO Doug McMillon emphasized, “We have momentum driven by our low prices, a growing assortment, and faster delivery times.”

However, new tariffs pose economic risks that could be greater than those during Trump’s first term. If shoppers face another wave of price increases, it could lead to a broader spending slowdown, impacting not just Walmart but the economy as a whole.

Latest government data revealed a sharp decline in retail sales for January, attributed to cold weather keeping people indoors, but the drop was larger than economists expected. Walmart, based in Bentonville, Arkansas, reported earnings of $5.25 billion, or 65 cents per share, for the quarter ending January 31. This is down from $5.49 billion, or 68 cents per share, this time last year. Adjusted earnings per share were 66 cents, with sales increasing by 4.1% to $180.55 billion.

For Walmart’s U.S. division, comparable store sales, including online figures, rose by 4.6%, which is slightly lower than the previous quarter’s 5.3%. Over the last year, the increase in online sales has slowed, rising only 16% compared to a 27% jump in the third quarter.

Looking ahead, Walmart predicts earnings per share of 57 to 58 cents for the first quarter, falling short of the 64 cents anticipated by Wall Street. For the full year, Walmart expects earnings to reach between $2.50 and $2.60 per share, also below the predicted $2.77. The company anticipates quarterly sales to rise by 3% to 4%, in a range of $166.35 billion to $167.97 billion, which is slightly less than analyst expectations as well.

Despite these challenges, Walmart’s strong focus on low prices and local sourcing keeps it in a strong position in a fluctuating market.