Consumer demand went through a once-in-a-generation shock in recent weeks, and Walmart (NYSE:WMT) was in the perfect position to observe the shift. That's just one reason investors are looking forward to the upcoming earnings report from the country's biggest retailer.

On Tuesday, May 19, that announcement will show how the company handled the unusual strain on its supply chain for essentials like cleaning supplies, in addition to entertainment products for consumers enduring stay-at-home recommendations.

Walmart's e-commerce channel will be a focus for investors this week, and so will the updated outlook that management issues about the strength of the consumer heading into a slow restart of the economy.

Let's take a closer look at the trends to watch.

A cart moving through the supermarket aisle.

Image source: Getty Images.

Market share

The company reported a slight growth slowdown in the most recent quarter, with comparable-store sales gains dropping to just under 2% after having jumped by more than 3% in prior quarters. CEO Doug McMillon and his team predicted a modest acceleration back in late February, but those trends were surely scrambled in the weeks that followed as COVID-19 halted restaurant traffic and closed many nonessential retailers.

All indications are that Walmart stepped up to its boosted role as a crucial purchase point for staples like groceries through the pandemic. But investors will be focused on the digital selling channel for some especially good news. That offering showed signs of helping boost market share against peers like Kroger in 2019, and more success on that score could further solidify Walmart's leadership position.

Challenges 

The pandemic came with significant stresses that might have hurt the profitability outlook. Walmart is one of the country's biggest employers, and that position comes with extra responsibility to protect front-line workers. Amazon.com recently said it expects to spend all its projected second-quarter earnings, over $4 billion, on COVID-19 protection. Walmart should make some similar comments about extra costs, including screening, cleaning, wage increases, and scaled-up efforts on digital fulfillment.

As for the rest of 2020, management will be looking at some historically weak economic numbers as it tries to project short-term growth. The outlook challenge is compounded by unpredictable factors like the pace of the restart and the path that the virus takes over the next few months.

Those issues might convince Walmart to decline to issue any outlook and perhaps withdraw its prior target of "at least 2.5%" comps gains in fiscal 2021. Rival retailing giants including Home Depot and Target will issue their results and updated forecasts this week, too, and it will be interesting to see if any of those reports stand out as being more bullish.

The updated outlook

If Walmart does project strong growth, that outlook will likely rely on its booming e-commerce segment. But expect that positive to be tempered by short-term earnings pressures related to new COVID-19 operating procedures.

Yet investors should be happy with that trade-off, since it would confirm Walmart's valuable position as a consumer staples giant that can grow through a wide range of selling conditions, including the recent retailing shock.