What Walmart earnings could tell us about consumer spending

As Walmart (WMT) is set to report its first quarter earnings this week, Yahoo Finance's Josh Lipton joins Wealth! to discuss what investors should look out for.

Wall Street is looking for earnings per share of $0.52 on revenue of $159.4 billion. Lipton explains that Walmart is the world's largest retailer, making it "a true bellwether for consumers." Analysts often look to the company's earnings to indicate overall consumer spending patterns.

Analysts also expect the company's gross margin to expand as Walmart grows in digital advertising, third-party marketplace fees, and fulfillment services.

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

This post was written by Melanie Riehl

Video Transcript

As earning season rolls on.

One of the biggest companies set to report this week is Walmart for more on what their earnings could mean for inflation and how much you may be spending next time you head to the store is our own.

Josh and Josh Ma.

Good to see you.

So, how much have our friends and neighbors been shopping at Walmart?

Exactly what we're about to find out here on Thursday, Walmart is expected to report Q one results, Wall Street is looking for earnings per share of 52 cents on revenue of $159.4 billion representing an increase year over year of 4.7%.

And we care about Walmart, of course, because it is the world's largest retailer.

And because of that, Wal Mart is seen as a true bellwether for consumers.

A gauge on how they are feeling and spending heading into this report, that stock is up about 15% this year.

And analysts who cover Walmart are big fans, nearly 90% of them think you should buy the stock.

I checked in with one of those analysts, Cfras Arun Sundaram and asked him what he's gonna focus on in this report for one.

He says the retailers us comparable sales arun estimates they will rise 3.8% year over year.

Now, that would actually be a slight deceleration from the last time Walmart reported financial results, Walmart shoppers have been feeling generally more cautious.

He says due to inflationary pressures and an uncertain economy, they're still spending on necessities like groceries but not as much on higher margin items like clothing.

And despite that deceleration, Arun says, he expects the company's total gross margin to actually expand in the quarter to 24.8%.

In part.

That's because Walmart is now now growing higher margin services businesses faster than its core retail business such as digital advertising, third party marketplace, fees and fulfillment services.

Investors focus on these new profit streams because they carry much higher margins.

And over the next over years, the bet is that they will represent a larger share of the company's overall business.

A final focus for Walmart investors.

In this report, the company's financial forecast, what are they going to say about the quarter and year ahead?

Arun expects Walmart to raise its annual guidance, but if they do not, he says investors might view that negatively mad.

All right, Josh.

Well, thank you so much as always giving us the retail beat.

Thank you really appreciate it.