Walmart Sounds a Warning on the Economy

Management says the expiration of federal stimulus programs is already affecting the retail giant.

Jeremy Bowman(TMFHobo)

Walmart (NYSE:WMT) is the largest company in the world by revenue. When it speaks, it’s worth listening to, since no other company has its finger more firmly on the pulse of the American consumer. Walmart receives nearly 10% of every dollar in non-automotive retail spending in the U.S., and it’s also the country’s (and the world’s) largest employer, making it highly influential on the American economy as well as a useful barometer for the economy and for investors of all stripes.

In its second-quarter earnings report, out Tuesday morning, Walmart had mostly good news to share investors. Comparable sales jumped 9.3%, driven by strong performance in food and general merchandise like home improvement, sporting goods, outdoor, and electronics. Revenue rose 5.6% to $137.7 billion, topping estimates at $135.5 billion, while adjusted earnings per share jumped from $1.27 to $1.56, well ahead of the Wall Street consensus at $1.25.  

IMAGE SOURCE: WALMART.

Investors cheered the results, sending the stock up 6% in pre-market trading, but shares finished the session down 0.7% as one item soured investors on the report. Several times in its presentations, management noted the impact of government stimulus, saying it got a significant tailwind from federal handouts, many of which ended in July. Walmart’s comparable sales slowed to around 4% in July as stimulus payments started to taper off, management said. 

CEO Doug McMillon seemed to believe that government stimulus was the biggest growth driver in the quarter, saying, “My sense is that the order of things, the order of tailwinds that impacted the business were one, stimulus, two, eating at home, three, being at home, and all the things that you wanted to do to have the indoors and outdoors be more pleasurable.”

Considering Walmart’s size and influence on the economy, that statement could indicate that an economic slowdown, at least in consumer-facing sectors, is on its way without another stimulus bill from Congress. Other data points seem to confirm those fears……more here

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