Walmart Q1 Earnings Preview: Consumer Confidence Hits Historic Low, Can the Retail King Navigate Headwinds?

TradingKey - Walmart ( WMT) will release its first-quarter fiscal 2026 financial results before the market opens on May 21, ET. Market consensus expects revenue of approximately $174.57 billion, up 5.36% year-over-year, and earnings per share (EPS) of $0.66, representing a 7.9% year-over-year increase.

Reviewing the fourth quarter of fiscal 2025, Walmart reported revenue of $190.7 billion, up 5.6% year-over-year, with an EPS of $0.74, beating market expectations. However, net profit fell by approximately 19% year-over-year, primarily due to a one-time asset impairment of about $420 million related to the Vizio integration and rising logistics costs. Excluding these charges, adjusted net profit actually increased by about 2%.

Investors should focus on three key areas in Walmart's earnings this quarter: same-store sales growth amid softening consumer demand, the new CEO's full-year performance guidance, and whether the advertising and membership businesses can maintain high growth to offset cost pressures.

Consumer Confidence Hits New Low; Same-Store Sales in Focus

The biggest question for this earnings report is whether Walmart can maintain growth as consumer confidence hits a record low.

The preliminary University of Michigan consumer sentiment index for early May reported 48.2, declining for three consecutive months and coming in lower than April's final reading of 49.8 and market expectations of 49.5, marking the lowest level since 1952. The survey showed that approximately 33% of consumers attributed the decline in confidence to rising gasoline prices, while about 30% mentioned concerns over tariffs.

In April, the CPI rose 3.8% year-over-year, with energy prices surging 17.9%. According to data from the AAA on May 17, the national average price for regular gasoline in the U.S. surpassed $4.50 per gallon, a year-over-year increase of approximately 44%.

Morgan Stanley ( MS) noted that while spending intentions for essentials like groceries and fuel remain in positive growth territory, the outlook for discretionary categories such as consumer electronics and alcohol has significantly worsened. Groceries account for approximately two-thirds of Walmart's U.S. revenue, providing a natural defensive quality; however, sales pressure on discretionary goods will test its "Everyday Low Price" strategy's ability to acquire customers among the demographic that is trading down.

Wall Street generally expects its U.S. same-store sales to achieve robust growth of 3.9% - 4.5%, with the primary drivers remaining higher-income segments continuing to "trade down" due to persistent inflationary pressures, as well as the counter-cyclical nature of core groceries.

The first performance test since the new CEO took office

On February 1, John Furner assumed the role of Walmart CEO. Just three months into his tenure, he is navigating a complex landscape defined by record-low consumer confidence, Middle East conflicts driving up energy prices and inflation expectations, and a Federal Reserve rate-cut outlook that remains stubbornly unclear.

John Furner’s commentary during the earnings call will be the focus. Analysts expect him to emphasize a pragmatic 'control the controllables' tone, prioritizing market share growth over margin expansion, and providing a clear assessment of consumption trends for the second half of the year.

Can advertising and membership businesses lead the growth charge?

Walmart is transitioning from a traditional retailer to a "retail + media + membership" model. Global advertising business grew 37% year-over-year in the fourth fiscal quarter, with the domestic Walmart Connect platform's growth reaching 41%, while Walmart+ membership revenue rose 15.1%. Consolidated gross margin improved by 13 basis points year-over-year, primarily benefiting from advertising and an optimized high-margin product mix.

Operating margins for advertising and membership revenue typically exceed 70%, far higher than those of traditional retail operations. With the grocery segment facing inflationary cost pressures, this structure is critical to safeguarding Walmart's profitability.

The market is broadly focused on whether global advertising growth can remain above 30% this quarter and whether membership revenue can sustain double-digit growth, which would serve to hedge against the risk of slowing discretionary sales.

What are Walmart's competitive advantages relative to its peers?

Home Depot ( HD) will release its earnings report before the market opens on May 19, with market expectations for revenue of approximately $41.54 billion and EPS of around $3.30. Impacted by inflation, interest rates, and softening renovation demand, the market expects first-quarter margins to remain under pressure. Investors should focus on same-store sales performance and the impact of the macro interest rate environment on the home improvement retail market.

Target ( TGT) will report earnings on May 20, with expected revenue of approximately $24.51 billion and EPS of around $1.41. UBS believes its comparable sales growth could outperform Walmart's, though this is partly due to a lower base from the same period last year; net sales for fiscal year 2025 declined 1.7%.

The TJX Companies ( TJX) will report earnings before the bell on May 20. Revenue is expected to reach $13.94 billion to $13.99 billion, up 6.3%-6.6% year-over-year, while EPS is projected at approximately $1, up 8.7% year-over-year.

TJX's value-driven positioning is highly compatible with the trend of trading down. While the market generally expects growth in both revenue and profit this quarter, inventory management and the ability to maintain healthy margins will be key to monitor.

Compared to Home Depot and Target, Walmart's business structure is more defensive in a down-market environment. Groceries represent a significant portion of its revenue, leaving it less exposed to high interest rates and a sluggish housing market. If consumption shifts toward essentials, Walmart is poised to capture traffic from mid-tier retailers and trade-down consumers.

Compared to TJX, Walmart provides more comprehensive coverage of high-frequency essential goods. While TJX primarily serves highly price-sensitive segments, Walmart caters to both daily necessities and the trade-down needs of customers across all income levels, offering broader potential for incremental growth.

Wall Street Backs Walmart as Valuation Divergence Widens

[Source: TradingKey]

According to data from TradingKey and Refinitiv, the consensus among 43 analysts is a "Buy" rating. As of May 17, the average price target was approximately $136.45, implying about 3.81% upside potential.

Barclays reiterated its Buy rating and maintained its $132 price target, as analyst Seth Sigman remains optimistic about Walmart's fundamental resilience.

Wolfe Research raised its price target from $135 to $137. Analyst Spencer Hanus expressed increased confidence in Walmart's operational capabilities within the retail market.

BofA Securities maintained its "Buy" rating with a $150 price target. The firm believes core customers are resilient, and that ongoing macro volatility and rising oil prices will instead drive more households toward discount retailers. Furthermore, membership trends are expected to remain strong, driven by value-added services such as free shipping, same-day delivery, and fuel discounts.

In summary, Walmart exhibits counter-cyclical resilience amid consumer spending slumps. Its defensive grocery segment, high-margin business transformation, and the pragmatic style of the new CEO are all positive factors. The market generally expects EPS to slightly beat expectations, though full-year guidance may be cautious.

The current TTM P/E ratio is approximately 48x, higher than the five-year average of 36x, suggesting that valuations already reflect much of the positive sentiment and upside is limited. The earnings report on May 21 will test whether this internally promoted CEO can lead the retail king steadily through the cycle.