Walmart Earnings: Low Prices Winning Over Customers, Who Are Spending More

Key Morningstar Metrics for Walmart

• Fair Value Estimate: $147.00
• Morningstar Rating: 2 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of Walmart’s Earnings

Walmart WMT capped off a strong fiscal 2024 with solid fourth-quarter results that exceeded our expectations. The firm’s $1.80 in adjusted earnings per share for the quarter landed about 8% ahead of our forecast as the company’s low prices continued to attract consumers. However, management issued fiscal 2025 guidance that came in slightly below our expectations on both the top and bottom lines. As such, we do not plan to materially alter our $147 fair value estimate.

Walmart US saw comparable sales expand 4% during the quarter (5.6% for the full year), as transaction gains helped offset a modest decline in the average ticket. We have been impressed by Walmart’s consistent domestic transaction growth during the year. We view its fourth-quarter comparable sales growth as particularly impressive, given its lapping of an 8% increase in the prior year. The grocery category continued to gain market share with sales up by a mid-single-digit percentage, but sales of general merchandise again posted a slight decline.

Despite the unfavorable sales mix, Walmart US posted a 5.2% operating margin during the quarter (up about 40 basis points annually), due to less promotional destocking activity. We do not expect pronounced margin expansion in the near term, as we forecast continued softness in the higher-margin general merchandise category and further investments in store remodels after 700 remodels were completed in fiscal 2024.

Sam’s Club also capped off a strong fiscal 2024 with comparable sales expanding by 3% (4.8% for the full year), driven by gains in transaction volume. It also delivered an impressive 9% average comparable sales growth over the past four years, and we expect it to expand at a low-single-digit trajectory for the foreseeable future. Internationally, sales expanded by 13%, driven by mid-single-digit growth in comparable sales in Mexico and China and growth from India’s online marketplace, Flipkart.