Walmart witnesses biggest crash in 25 years, consumer stocks follow

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Walmart

All eyes were on Walmart (NYSE: WMT) as the retail giant reported its much-anticipated Q1 results. Considering how worried investors are about the state of the markets, retailers like Walmart are considered one way of gauging the health of our economy. On that note, Walmart and other consumer stocks plunged after the retail giant’s Q1 results proved disappointing.

Walmart saw a 25% drop in quarterly earnings, with earnings per share coming in at $1.30 compared to Wall Street’s $1.48 EPS target. Revenues were slightly better than expected, $141.6 billion versus $138.9 billion expected, but markets right now place more importance on hitting earnings targets than revenue targets. That’s especially the case now, with investors migrating away from growth stocks and into value investments.

So far this quarter, we’ve seen reoccurring theme amongst companies whose Q1 results fell short. Generally, it’s a combination of rising costs, specifically fuel, as well as rising labor prices, that tend to be the main explanations we see for why some companies seem to be struggling right now. Lingering supply chain issues and growing inventories have also been a problem in the retail world.

All of these were reasons cited by Walmart’s management on Tuesday as to why the company’s results were underwhelming. At the same time, management was quick to claim that investors were overreacted to the news as well.

While the earnings miss came as a disappointment to many, some experts aren’t too worried about this earnings miss. Many think this will be just a one-time thing, especially as Walmart has a history of doing well during bear markets.

We don’t expect this miss to become a norm, seeing that Walmart has historically outperformed competition during tough economic times,” said analyst Arun Sundaram on Tuesday.

Despite this, the news was enough to send Walmart crashing. Shares plunged more than 11.4% over the course of the day, marking the worst single-day performance in over 25 years. The Dalton family lost over $17 billion alone in today’s selloff. We’ve already started seeing headlines about how Walmart’s earnings miss could be a warning sign of further pain in the retail sector.

Other related consumer stocks were down as well following the Walmart news. Target (TGT), Dollar General (DG), and Dollar Tree (DLTR) were all down a few percent as well following the Walmart miss. Target will report its own Q1 results on Wednesday, as will Lowe’s. Traders are carefully waiting to see whether these retail giants will report similar disappointing results considering the Walmart miss.

 

Walmart Company Profile

America’s largest retailer by sales, Walmart operates over 11,300 stores under 58 banners, selling a variety of general merchandise and grocery items. It’s home market accounted for 76% of sales in fiscal 2019, with Mexico and Central America (6%), the United Kingdom (6%), and Canada (4%) its largest external markets. In the United States, around 56% of sales come from grocery, 33% from general merchandise, and 11% from health and wellness items. The company operates several e-commerce properties apart from its eponymous site, including Flipkart, Jet.com, and shoes.com (it also owns a roughly 10% stake in Chinese online retailer JD.com). Combined, e-commerce accounted for about 5% of fiscal 2019 sales. – Warrior Trading News

 

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