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Walmart reports earnings today. What to expect.




Walmart sells groceries, which everyone needs. But just because food is a must, does that mean the discount giant has a leg up on its competitors who sell things like clothes and lamps?

That is the question the company will answer when it reports earnings ahead of Thursday’s opening bell.

Analysts are looking for Walmart (ticker: WMT ) to earn $1.32 per share in its fiscal first quarter, ahead of the company’s guidance of $1.25 to $1.30 and year-ago earnings of $1.30. Consensus estimates project revenue at $148.94 billion.

The retail earnings season is off to a subdued start. Target ( TGT ) delivered earnings that were better than expected, although the big-box company was cautious about its guidance. And discount retailer TJX Cos. (TJX) also delivered a poor forecast for the second quarter. Both shares zigzagged on the results.

The focus of Target and TJX is more on discretionary products like clothing, a category that has taken a hit as inflation forces shoppers to spend more on necessities like food. Even Home Depot ( HD ) noted weakness in discretionary sales when it reported results Tuesday.

In contrast, Walmart excels at selling necessities, which is how it earned its reputation as a more defensive retailer.

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That said, the company has not been immune to changing consumption patterns. For example, it was caught flat-footed last year when shoppers quickly stopped buying discretionary products such as clothing and home goods. The turnaround forced management to sharply lower guidance.

And Walmart sounded the alarm again in February. The company gave a weak forecast, which overshadowed the strong figures, and warned that customers felt pinched.

Now, Walmart’s outlook will probably again be the key to the stock.

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Expectations may be lower given Target’s performance, but investors will be eager for information on how Walmart’s core lower-income customers are faring.

If customers seem as if they are still laser-focused on cutting expenses to the bone, investors may not be happy.

Or the stock could gain if there are signs Walmart is benefiting from more shoppers shopping down and tiptoeing back into the discretionary aisles.

Write to Teresa Rivas at teresa.rivas@barrons.com



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