Trump Tariffs Could Cause Profit Growth to Decelerate at Walmart (WMT)

Stock (Symbol)

Walmart (WMT)

Stock Price

$88

Sector

Data is as of

Expected to Report

Company Description

Walmart Inc. is a technology-powered omnichannel retailer.

The Company is engaged in the operation of retail and wholesale stores and clubs, as well as e-commerce websites and mobile applications, located throughout the United States, Africa, Canada, Central America, Chile, China, India and Mexico.

It operates through three segments: Walmart U.S., Walmart International and Sam’s Club.

The Walmart U.S. segment includes the Company’s mass merchant concept in the United States, as well as e-commerce, which includes omni-channel initiatives and certain other business offerings such as advertising services through Walmart Connect. It operates under the Walmart and Walmart Neighborhood Market brands.

The Walmart International segment consists of the Company’s operations outside of the United States, as well as e-commerce and omni-channel initiatives.

The Sam’s Club segment includes the warehouse membership clubs in the United States, as well as e-commerce and omni-channel initiatives. Source: Refinitiv.

Sharek’s Take

Here’s a timeline of Walmart, from my book the School of Hard Stocks:

• In 1962, Sam L. Walton and his brother J. L. “Bud” Walton opened the first Wal-Mart store in Rogers, Arkansas.
• By 1967, WMT had grown to 24 stores with annual sales of $12.6 million.
• By 1970, it was a publicly traded company, offering 300,000 shares to the public at $16.50 per share.
• In 1973, Wal-Mart expanded to Tennessee.
• In the early 1970s, shoppers clearly should have seen that the Wal-Mart concept was working: they would drive out of their way to shop at Wal-Mart. The company grew profits at 57% in 1971, then it backed up this growth with 49% growth in 1972 and 33% in 1973.
• An accounting change resulted in only a slight increase in profits in 1974.
• By 1975, it was time for the Wal-Mart train to start rolling again. 1975 profits grew an astounding rate 67%. The company, opening in states one by one, had 125 stores in operation and went through its third two-for-one stock split. By this time, annual profit growth was averaging better than 40% a year.
• By early 1982, it was obvious that Wal-Mart was a leader for the ages. Its ten-year profit growth rate was 39%. Forbes ranked it the number-one general retailer for seven years straight. Even after missing a twenty-fold gain since 1975, new investors would still make 100 times their original investment — had they held on.

Segment Information (last quarter):

• Walmart US
  • 69% of total company revenue, sales up 5% year-over-year.
• Walmart International
  • 18% of revenue, sales -1%.
• Sam’s Club US
  • 13% of WMT revenue, sales +13%.

Walmart (WMT) stock has a high safety rating, pays a dividend, and management buys back stock. In 2024 management bought back $4.5 billion in stock and paid out $6.8 billion in dividends. The Estimated Long-Term Growth is only 9%. WMT yields 1%, adding the Est. LTG to the dividend yield might net investors 10% a year long-term. That’s good but not great. Walmart is on the radar for the Conservative Growth Portfolio.

One Year Chart

The Est. LTG of 9% isn’t high enough. 10% to 12% would be better.

Notice profits have been growing nicely the past four quarters. But growth is expected to slow (Estimates). Maybe WMT can continue beating the street?

The P/E of 34 is a little high for what may be a 10% grower now. I think a 32 P/E is reasonable.

Earnings Table

• Management said it is growing profit faster than sales. It boosts high-margin areas like memberships, its online marketplace, and advertising while it keeps prices low and pays workers better.
• WMT performed well in the US, Mexico, Canada, India and China.

Annual Profit Estimates decreased this quarter. Management expects earnings of $2.50 to $2.60 this year, which is below analyst estimates of $2.62. But WMT just finished its fiscal year and management may be underpromising to overdeliver later.

Qtrly profit Estimates are for -2%, 6%, 5% and 9% profit growth the next 4 qtrs. Notice qtrly profit estimates declined The CFO didn’t mention tariffs in quarterly guidance,

Fair Value

My Fair Value is a P/E of 34. That equates to $84. ($2.62 x 32 = $84).

The stock is $88 this quarter.

So the shares are around fair value. If the P/E doesn’t rise then the stock should grow at the rate profits do, which seems like 10% a year if I had to guess.

Notice the median P/E was $31 in 2024. That’s a lot higher than the stock has had in prior years during the past decade.

Bottom Line

Walmart (WMT) stock was hot last year. The stock jumped from $53 to $90 during 2024. Alas, the P/E got a little-to-high and the shares have since settled back.

Trump tariffs might take profit growth down from the double-digit rate this company has been delivering. Slowing growth isn’t good. Profits grew an average of 14% the past 4 qtrs. I think profit growth will slow to around 10% a quarter.

WMT is on the radar for the Conservative Growth Portfolio.

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