By Walmart stock is down about 6% this morning after warning the inflationary pressures could weigh on its adjusted per-share earnings in 2025.
Economists are concerned that Trump tariffs could trigger a trade war, which in turn will lead to a resurgence in inflation in the United States.
Consumer prices were already up more than expected in January.
However, there’s reason to believe that WMT is strongly positioned to navigate such challenges.
Why inflation may not be a big threat to Walmart
Walmart could succeed in managing inflationary headwinds under the Trump administration as it’s been gaining popularity among wealthier households.
In the company’s third financial quarter, the $100,000 plus income group made up three-quarters of its market share gains.
That’s significant for WMT as higher-income households are generally more immune to inflation.
They have more disposable income and savings, which can help them absorb the increased costs of goods and services.
Plus, wealthier shoppers often have a more diversified investment portfolio, which can provide some protection against inflation as well.
More importantly, while Walmart Inc. has attracted and ultimately lost higher-income households before, John Furner – its US chief executive is confident they’ll stay this time as online shopping at Walmart helps them save both time as well as money.
WMT is much more than just a retailer now
Walmart stock may be poised for further gains in the face of inflationary pressures as it’s been investing rather aggressively to become a platform company.
The multinational has set up a burgeoning advertising business. The high-margin segment could help offset any potential weakness in the company’s core brick-and-mortar retail business amidst the expected increase in consumer prices.
Additionally, the retailer could tap into private labels, especially the upscale ones like Bettergoods, to keep its own amidst potential inflationary pressures in 2025.
For investors, WMT shares remain attractive despite an exceptional bull run in the trailing 12 months as they also currently pay a dividend yield of 0.80%.
Walmart Q4 earnings highlights
On Thursday, Walmart Inc reported 66 cents a share of earnings on $180.55 billion in revenue for its fiscal Q4.
Discussing the company’s strategy to navigate the new tariffs environment, John David Rainey – the chief executive of WMT said “We’ll shift supply where necessary to try to take advantage of lower costs that we can then pass on to consumers.”
Investors should also note that the big box retailer has a history of opting for conservative guidance at the start of its financial year.
Heading into the earnings release, Wall Street had a consensus “buy” rating on WMT shares.
Analysts have an average price target of $108 on Walmart stock at writing which indicates potential for a more than 10% upside from current levels.
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