Why Walmart’s signal of a slowdown has investors on edge

• Walmart’s stock sank Thursday morning. Despite reporting strong quarterly earnings, the company’s full-year guidance fell short of analyst expectations.
• The company’s projections did not account for potential impacts from tariffs. Its CFO said the company would not be immune if President Donald Trump implemented tariffs on Mexico, Canada and China.
• Walmart is an economic bellwether. High inflation continues to impact retail as Walmart sees more high-income families shopping in stores and online to save money.

Full Story

Walmart’s stock sank Thursday morning, Feb. 20, after the company announced lower-than-expected profit growth expectations for the upcoming year. Walmart said the projections did not factor in possible tariffs. 

Within the first 30 minutes of trading on Feb. 20, Walmart’s stock fell nearly 7%, even though Walmart’s quarterly earnings beat expectations. Walmart said it saw broad-based sales momentum across merchant categories and strong holiday sales as it reported record revenues. 

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The retail bellwether touted sales gains driven primarily by upper-income households. Walmart has seen growing appeal from higher-income groups, especially since inflation started rising in 2021. 

Where Walmart missed

Investors have focused on Walmart’s full-year guidance, which fell short of expectations. For fiscal year 2026, Walmart anticipates net sales to increase 3% to 4%, while analysts had projected north of 4%. 

Expected earnings per share also fell flat at $2.50 to $2.60, while Wall Street expected $2.76. 

What Walmart said about tariffs

The company’s projections, which fell short of expectations, did not factor in the possible impacts of tariffs. President Donald Trump paused implementing 25% tariffs on goods from Mexico and Canada this month. It is unclear if they will take effect in March or if another deal will be reached. 

Walmart sources about two-thirds of its goods from the U.S. That said, Walmart Chief Financial Officer John David Rainey told CNBC the company would not be “completely immune” to tariffs. He said the company was impacted eight years ago.

“We’ve lived in a tariff environment for the last seven or eight years, and we’ll do what we know how to do,” Rainey told CNBC. “We’ll work with suppliers. We’ll lean into our private brand. We’ll shift supply where necessary to try to take advantage of lower costs that we can then pass on to consumers.”

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What about inflation?

Walmart has shown an ability to come out ahead with rising inflation by gaining market share among higher-income households. However, inflation remains at the top of the retailer’s mind as the retailer’s projections drag down the stock market. 

Inflation came in hotter than expected in January at 3% for the year and 0.5% for the month, which is the hottest monthly rise since August 2023. 

In minutes from the last Federal Reserve meeting released this week, members of the monetary policy committee confirmed inflation is of concern. Fed Chair Jerome Powell made clear he is in no hurry to cut rates in this inflation environment. 

The president also acknowledged inflation’s rise. 

“Inflation is back,” Trump told Fox News host Sean Hannity. “I had nothing to do with it.”