To The Moon

$Wal-Mart(WMT)$ reported Q4 (FY2025) results before the market on the 20th, and while it beat expectations in the current period , 2026 guidance is cautious (very cautious), reflecting significant concerns about the macro environment (consumer downgrade, inflation).Long-term growth in profits also relies on supply chain optimization, e-commerce penetration and high-margin businesses (advertising, membership services).

Due to the current valuation has been in a relatively very high position, and the funds relatively holding, pre-market plunge of 8%.

Investment highlights

Why is guidance so cautious?Expectations of negative impact of macro factors pulled full

• Consumer downgrade: U.S. consumer confidence index fell to 71.1 (six-month low) and companies plan to maintain market share through low price strategies (e.g., private label).

• Cost pressure: tariff risk (~40% of goods rely on imports, especially referring to China) and rising logistics costs could squeeze margins.

  • Q4 inventories fell 2.6% but grew at a rate of +2.81% YoY >consensus 1.28% YoY and days on hand 39.8 days >consensus 34.63 days;

What are the next incremental steps in which directions?

• Supply Chain Efficiency: savings target 50% achieved, automated warehouse coverage increased to 65% (full deployment targeted for 2026).

• Advertising business: Walmart Connect revenue +24%, a key driver of margin expansion.

• E-commerce and advertising business: global e-commerce sales +16% (led by U.S. market), delivery costs down 20%.

• International Market Performance: Sam's Club sales +13.8% in China, Mexico investment drives growth in Latin America, but currency fluctuations weigh on international revenue.

Financials vs. Market Expectations

1. Overall Revenue

   • Actual revenue: $180,554 million (up 4.1% year-over-year), beating market expectations of $180 billion.

   • Segment performance:

     • Walmart US: net sales of $123.5 billion (+5.0%), same-store sales (excluding fuel) up 4.6%.

     • Walmart International: net sales of $32.2 billion (-0.7%), primarily driven by currency fluctuations, but e-commerce sales up 43%.

     • Sam's Club: net sales of $23.1 billion (+5.7%), with same-store sales (excluding fuel) up 6.8%.

2. Margin and EBITDA

   • Operating margin: 8.3% (up 0.4 percentage points year-on-year), with adjusted operating profit of $7,859 million.

   • Gross margin: consolidated gross margin improved by approximately 20 basis points year-on-year to 24.4% (a continuation of Q3 trend), benefiting from inventory optimization and improved business mix.

   • EBITDA: not directly disclosed, but operating profit growth of 8.3% indicates improved profitability.

Analysis of key operating metrics

1. Same-Store Sales (Same-Store Sales)

   • Walmart US: +4.6% (up from 4.0% a year ago), driven primarily by the higher-income household segment.

   • Sam's Club: +6.8% (significantly higher than 3.1% a year ago), with membership revenue growth and increased e-commerce penetration key.

2. Inventory Management

   • Inventory days: Q4 inventory down 2.6% YoY, supply chain automation (e.g., with Symbotic) improves efficiencies and inventory turns improve.

3. Margin changes

   • Gross margin: improved mainly due to fewer price cuts and higher penetration of private labels (e.g. Great Value range).

   • Operating margin: benefited from growth in higher-margin businesses such as advertising (+29% global advertising revenue) and expense leverage.

   • Net margin: adjusted EPS of $0.66 (beating expectations of $0.65), but net margins declined slightly, dragged down by international operations.

FY2026 Earnings Guidance

1. Revenue and Profit Expectations

   • Q1 FY2026: Adjusted EPS is expected to be $0.57-$0.58 (lower than expected $0.65), mainly due to macroeconomic uncertainty.

   • Full year 2026: Adjusted EPS is expected to be $2.50-$2.60 (lower than expected $2.77), and revenue growth may slow to 3%-4%.