Why Walmart Plunged Today
Key Points
Walmart was on the receiving end of a negative analyst note today.
The note says Walmart may be lowering prices, resulting in lower same store sales than expected.
Walmart is well-positioned to weather a stretched consumer, but its valuation leaves little margin of safety.
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Shares of Walmart (NASDAQ: WMT) fell 4.5% on Wednesday as of 1:05 p.m. EDT. The day's fall marks an extension of a recent pullback in Walmart shares, which are now down nearly 20% from their May highs.
Today, a Wall Street analyst issued a negative note on Walmart's same-store sales, leading to another leg down in this month-long pullback.
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Cleveland Research channel checks show a slowdown
Today, sell-side research firm Cleveland Research published a note on Walmart, stating that its channel checks showed a slowdown in same-store sales. The analyst noted that Walmart may be lowering prices to clear excess inventory, which the company may offset with tariff refunds. As a result, the analysts questioned whether Walmart will be able to beat its sales guidance for the quarter, which ends at the end of July.
Earlier this year, the Supreme Court struck down most of the tariffs imposed by the Trump Administration in early 2025, which affected all major retailers. As such, companies that paid tariffs to the government last year are now entitled to a refund. Customs and Border Protection began taking applications for refunds beginning on April 20.
However, while last year's tariffs were struck down, it is expected that the Trump Administration could issue new and potentially higher tariffs under a different statute, beginning on July 24.
Combined with higher oil prices in the second quarter due to the Iran war, consumers may be squeezed a bit. Higher oil and gas prices also drive up the costs of goods, as do tariffs. So, even though Walmart is perhaps best-positioned of nearly any big box retailer due to its buying power, it can't totally escape the dual problems of lower demand and higher costs.
Image source: Getty Images.
Walmart's high valuation does it no favors
Even after the recent pullback, Walmart stock trades at a lofty 38 times earnings. This is for a company that guided to revenue growth of just around 4% this year.
That type of valuation reflects Walmart's competitive advantage as a consumer staples leader, but doesn't leave much margin of safety at all, should anything go wrong. With today's note, that was certainly enough to deepen the current pullback. Even with the recent slide, Walmart shares are no bargain.
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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool has a disclosure policy.
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