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Why Walmart Stock Dropped 6% at the Open Today

By Reuben Gregg Brewer - Feb 18, 2021 at 10:37AM

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The global retailing giant reported solid sales, but investors weren't pleased with its earnings or the company's outlook.

What happened

Shares of retail juggernaut Walmart (WMT -0.28%) fell a quick 6% at the open of trading on Feb. 18. The big news was its earnings release, which was something of a mixed bag. Overall, however, it appears that Wall Street's initial reaction was negative.

So what

Walmart reported record revenue of $152 billion in the fourth quarter of fiscal 2021, up a little more than 7% year over year. Comparable store sales at its namesake store increased 8.6% with strength across most of the company's product categories. Online sales increased just shy of 70%. The company's Sam's Club warehouse store business saw comparable store sales increase 10.8% with online sales increasing just over 40%. International sales increased 6.3%, adjusting for currency volatility. Adjusted earnings, which pulls out one-time items, came in at $1.39 per share, falling short of the analyst consensus estimates of $1.51. For the full year the company's adjusted earnings came in at $5.48 per share, up from $4.93 the year before, on a 6.7% increase in revenue. There were positives in there, but investors generally don't like an earnings miss.   

A person pushing a shopping cart through a store.

Image source: Getty Images.

That was complicated by two other issues. First, Walmart's stock has done pretty well since the lows it reached in April 2020, rising more than 30% at one point. That trails the broader market, but Walmart is a more of a slow and steady performer than a growth stock. So investors seemed to have priced in a fair amount of good news. And then there's Walmart's outlook for fiscal 2022, which was less than inspiring. It is projecting company sales to fall overall including the impact of divestitures. But even excluding that factor, sales are only expected to rise in the low single digits. That's the basic presumption across all of its main business units. Earnings, excluding divestitures, are expected to be flat to slightly higher. In other words, the coming year is likely to be "meh," at best. Wall Street tends to look forward, so it's not shocking that the stock fell on that update, especially when you compound it with the earnings miss.   

Now what

Walmart also announced that it has increased its dividend by 2%. That's good news, but the change was not huge. The real point of the hike was to show that investors can still count on the giant retailer to reward them over time with a consistent and growing dividend. And that, perhaps, sums up the story of Walmart. It has basically grown over many years into a slow-moving retail industry bellwether, a fact investors appear to be realizing again now that the sales boost related to the coronavirus is starting to fade. Indeed, it's worth noting that the roughly 1.5% yield the stock offers today is slightly lower than what you'd get from an S&P 500 Index fund.  

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