Walmart achieves new record after bumper results

With its share price at an all-time high and popular as ever, the world’s biggest retailer is now worth almost half a trillion dollars following latest figures. But numbers from Home Depot turned investors off. Graeme Evans explains why.

20th February 2024 15:44

Graeme Evans from interactive investor

Walmart shares traded at a fresh record today as the world’s biggest retailer geared up for its imminent 3-for-1 stock split with forecast-beating annual results.

The business, which has more than 10,500 stores in 19 countries, crossed $100 billion (£79 billion) of e-commerce sales in 2024 as annual revenues rose 5.7% in the fourth quarter and by 6% across the year to $648.1 billion (£512.2 billion).

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Net income fell 2.3% year-on-year to $5.68 billion in the fourth quarter but adjusted earnings per share rose by a bigger-than-expected 5.3% to $1.80.

Arkansas-based Walmart Inc (NYSE:WMT), which is known for giving conservative forward guidance, forecast current quarter growth in constant currency of 3-4% compared with 2023’s 4.9%.

The shares responded by touching a record $180 in the first hour of Wall Street dealings, having risen by a fifth in the past year as Walmart has defied the tougher economic conditions through the delivery of solid trading quarters and market outperformance.

Analysts at Oregon-based D.A Davidson have a price target of $195, believing that today’s results should support the recent favourable trends.

By next week, the shares should be more accessible for retail investors as Walmart will have completed its latest stock split since joining the New York Stock Exchange in 1972.

The move, which increases the number of outstanding shares from about 2.7 billion shares to 8.1 billion, is in line with a pledge by founder Sam Walton that purchasing whole shares, rather than fractions, is possible for all staff.

Chief executive Doug McMillon said recently: “Given our growth and our plans for the future, we felt it was a good time to split the stock and encourage our associates to participate in the years to come. As Sam said, ‘We’re all in this together. That’s the secret.‘”

Several high-profile tech companies carried out splits in 2022, including Tesla Inc (NASDAQ:TSLA), Alphabet Inc Class A (NASDAQ:GOOGL) and Amazon.com Inc (NASDAQ:AMZN), but the number doing so since then has fallen away.

In contrast to Walmart’s results-day performance, shares in The Home Depot Inc (NYSE:HD) today opened lower after the home improvement chain reported a 2.9% decline in fourth-quarter sales to $34.8 billion (£27.5 billion) and 17% fall in net earnings to $2.8 billion (£2.2 billion).

Chief executive Ted Decker called 2023 a year of moderation as the chain focused on several initiatives to strengthen its business following three years of exceptional growth.

He added: “We remain excited about the future for home improvement and our ability to grow share in our large and fragmented market, which we estimate to be over $950 billion."

The company’s 2024 forecast for an underlying sales decline of 1% was slightly short of Wall Street expectations, although with US rate cuts due by the summer Morgan Stanley expects the performance to be second half weighted.

It said the stock represented “a conduit for cyclical risk-on” sentiment given its quality, investments and leverage to the housing cycle. “Essentially, this protects downside and is another dimension of the bull case that we had not considered coming into 2024.”

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