Walmart has always stood out as a budget-friendly place to shop with “Always Low Prices. Always,” its tagline for nearly 20 years before refining it in 2007 to the more value focused “Save Money. Live Better.” That tagline embraces higher-income consumers along with core budget-challenged customers.

The potential impact of the Trump administration tariffs weighs heavily on analysts’ minds, and perhaps what really spooked analysts in the earning call was a statement by Rainey to a question about guidance: “We don’t have any explicit assumption in our guidance around tariffs.” But CEO Doug McMillon had reassuring words: “Tariffs are something we’ve managed for many years, and we’ll just continue to manage that.”

Walmart is living better and just released a strong year-end earnings report. Global annual sales rose 5.1 percent to $681 billion, though the fourth quarter came in a little weaker, up 4.1 percent to $181 billion. Annual comparable sales in the U.S. were up 4.6 percent at Walmart and 6.8 percent at Sam’s Club, excluding fuel. Walmart U.S. ecommence sales rose 20 percent and the Marketplace was up 34 percent. Even in China, where the economy has been lagging, Walmart generated nearly 30 percent growth to $5.1 billion with comp sales up 23 percent in the fourth quarter.

In even better news, it reported operating income more than doubled sales growth in the fourth quarter at 8.3 percent and it ended the year with operating income rising 8.6 percent. The company attributed that remarkable uptick in income to operating discipline and growth in higher-margin businesses, such as advertising on its global Walmart Connect platform, Walmart+ and Sam’s Club memberships and its online Marketplace.

Stocks Took a Dive

But that wasn’t enough. Despite solid performance and full-year coming at the top of third-quarter guidance, Wall Street wasn’t pleased. Walmart stock values dropped sharply the day of the earnings call and continued to fall the day after to end up some eight percent down for the week.

Toward the end of the earnings call, CFO John Rainey quipped, “Our plan this year assumes that we’re going to buy back more stock than we did last year. And certainly, if the early reaction to today’s announcement is any indication, we have an opportunity to right now.”

What seems to have alarmed investors was the company’s conservative outlook for fiscal year 2026. It projected first-quarter revenues to be up between three and four percent and the full year to end in the same range. Operating income is expected to increase between 3.5 and 5.5 percent on its already robust income growth this year.

“We’ve been operating in a highly dynamic backdrop for several years, and we expect this year to be no different,” Rainey said in the earnings call. “Our outlook assumes a relatively stable macroeconomic environment but acknowledges that there are still uncertainties related to consumer behavior and global economic and geopolitical conditions. As a result, we’ve taken a similar approach to our initial guidance for the year as we have in the past couple of years, balancing known risk with what we can control.”

Exceeding Expectations

Coming from the “deliver more than you promise” school, Walmart still faces headwinds. There’s no disputing that Walmart faces another highly dynamic year with many uncertainties, yet the company revealed a number of strengths in its business during the earnings call that should have required more reflection than some analysts gave it.  Walmart believes it is ready for whatever the economy, inflation or the Trump administration throws at it this year.

• The customer mix is evolving. In the third quarter, Walmart reported households earning more than $100,000 made up 75 percent of the company’s market share gains and the trend continued in the fourth quarter. “We’re seeing higher engagement across income cohorts with upper-income households continuing to account for the majority of share gains,” Rainey announced.
• Grocery remains a “standout category” and health and wellness, including pharmacy, also drew more customers to Walmart. In addition, the general merchandise category advanced low single-digits on a comp basis in the fourth quarter, with noted strengths in hardlines, toys, home and fashion.
• With inflation moderating last year, Walmart US was able to roll back prices on over 22,000 products, including 5,800 in the fourth quarter. “We’re prepared for all sorts of environments, whether it’s more promotional or less promotional. We’re going to focus on value for our customers and we’re going to do everything we can do to control prices and keep prices low,” said John Furner, CEO of Walmart US.
• We’re not just known for value; we’re also increasingly known for convenience,” Rainey reiterated. Over 90 percent of U.S. households have the ability to get same-day delivery for store-fulfilled orders. And in the fourth quarter, more than 30 percent of orders were fulfilled in less than three hours for an expedited delivery fee.
• Walmart US also integrated pharmacy, general merchandise and grocery into a single online order system for same-day delivery. The company reports that boosted growth in pharmacy customers who are guaranteed to be repeat customers.
• The potential impact of the Trump administration tariffs weighs heavily on analysts’ minds, and perhaps what really spooked analysts in the earning call was a statement by Rainey to a question about guidance: “We don’t have any explicit assumption in our guidance around tariffs.” But CEO Doug McMillon had reassuring words: “Tariffs are something we’ve managed for many years, and we’ll just continue to manage that. We’ve got a great team. We know how to do that. We can’t predict what will happen in the future, but we can manage it really well. And we’re wired to try and save people money. So that will be our ultimate goal. “According, Walmart began shifting imports from China to India in 2023, though it still relies heavily on Chinese imports. Yet, the China tariffs imposed during Trump’s first term carried over into Biden’s four years, adding a measure of confidence in Walmart’s ability to navigate the threat from new tariffs.
• For a company the size and scale of Walmart, with over 10,500 stores and numerous websites in 19 countries, it has to know where everything is at any point in its supply chain. Bragging that it is a “people-led, tech-powered omnichannel retailer,” Rainey emphasized the company’s investments in its tech stack and supply chain automation as contributing to the top-line and bottom-line improvements last year. He added Walmart’s new generative AI learning tool called Wally. “Wally is learning to help us get to the root cause of issues related to things like out of stocks or overstocks with more accuracy and speed.” He also said members of the company’s tech development team have a new coding tool that greatly improves efficiency and accuracy in the software development process, saving some four million developer hours. Also on the horizon is an AI tool to help Walmart in food pricing through a partnership with Helios, which calculates climate risk to forecast prices and availability of agricultural commodities. Equity research firm Jeffries reported that Walmart got tuned into Helios after it won its Open Call competition for entrepreneurs, the first software winner in the competition’s history.

Confidence Should Be Growing

In the earnings call, McMillon stressed newfound operational efficiencies through the investments made over the past years. This also allowed it to reduce costs, such as eliminating nearly 700 corporate jobs in New Jersey and North Carolina, which includes closing its Charlotte, NC office. Retained management staff will be relocated to other locations, including to its newly expanded 12-building headquarters in Bentonville, which is slated to be completely opened by the end of the year.

“I love how we’re changing how we think and work without changing who we are. I can see us getting faster,” he said as he looked forward to transitioning to the new home offices. “It’s an exciting time. It’s also a time to remember the special things about this company that we want to strengthen and perpetuate. Moving to a new location doesn’t change who we are.

As a whole, Walmart has more upside than downside as it faces the coming year, despite its conservative guidance. I share McMillon’s confidence in the company’s ability to maintain momentum no matter what may come its way.