Walmart Warns Fuel Costs Are Squeezing the Bottom Line

本站添加: 2026-05-21

[00:00:00]Sticking with earnings, Walmart shares falling in the premarket after solid sales growth failed to offset concerns over rising energy costs. David Bellinger of Mizuho with an outperform rating on the shares and a one thirty seven price target. David joins us now for more. David, good morning.

[00:00:15]Good to see you.

[00:00:15]Hey. Great. Thanks for having me on.

[00:00:16]Stock's down about 2%. Earnings call is underway. This phrase came up investing in price. We've been talking about that. Are they struggling to pass it on, or is this just a fight for market share?

[00:00:26]Yeah. I think it's the fight for market share. So very in line quarter. It seems like in line isn't enough these days, especially as you have more of this consumer pressure building, the the tax refund payments have basically fizzled out. I mean, those are up 18% year over year. Now you've also got consumers going straight into the teeth of these $4 and 50, potentially $5 gas prices. Walmart's seeing that, I think, in their business, incremental pressures on the low end, but they're also seeing it on the cost side. And that that's what hit them today. Talked about 250 basis points that was shaved off of operating income dollar growth because of higher fuel cost. But I I think what's concerning investors today is that that's only a partial period impact for q one. I So the the full force hasn't hit in q two, q three, and q four. So we'll we'll see what's to come if prices have to move up across the space. But Walmart is making a very, very pinpoint move, very decided move to keep prices down as much as possible as long as possible, and this is a a share gain story.

[00:01:28]Are they in the strongest position to do it versus, say, a Kroger versus a Target?

[00:01:32]Are they in the best position to do this?

[00:01:34]Yes. I would say absolutely. Did you think about the alternative and creative business lines? Walmart has advertising marketplace. These are really high margin, great businesses. Those are a source of funds to invest. Think of those as Walmart's AWS. Like, Amazon has AWS to go after retail pricing, take all their share. Walmart has elements of that. Others in retail, they they don't really have that, you know, cookie jar to dip into that bucket. So Walmart is better positioned than most, and that that's why we still like this name.

[00:02:04]Walmart's investing heavily in artificial intelligence. They've been talking about how they're trying to transmit it to each one of their associates as they call them their employees. I'm looking right now at the number of employees at Walmart. It's gone from 2,300,000 to 2,100,000 and sort of stayed at that level. Is that a positive for the stock in the sense that they are investing more in AI and seeing where they can get efficiencies elsewhere?

[00:02:27]For sure. For sure. We don't expect headcount cuts at Walmart. It's more of keep this employee count pretty stable, and then you could grow incremental revenues off of that. So so a more powerful flow through, a more powerful earnings model. But they're talking about the business being very people led but tech powered. So so it's more of an amplifier for their employee base as opposed to cuts or anything like that, but it it should have, you know, cost savings throughout the business. And then we've done a lot of work around agentic commerce, which is extremely, extremely early days, but that could put Walmart up at the top of the list. Again, more of the share gain, especially if they have lowest price, fastest speed. That's what this agentic shopping will prioritize, and we think Walmart's in a good spot from that perspective as well.

[00:03:11]So bear with me, but a lot of places are talking about the idea of keeping their staff the same, maybe shrinking just a little bit, and then gaining a significant amount of market share. Where are they taking the market share from? Who's losing on the other side of this as they do more with less?

[00:03:29]Yeah. It's a great question. So a lot of these large cap, you know, mega retailers, Walmart, Amazon, Costco, they've been gaining shares, especially in the grocery category is one that gives you that frequency of purchase. You get add ons into other categories, but it's a lot of these, you know, smaller retailers, not as much investment over the last several years. Then a lot of these private guys, you know, mom and pop type stores, that's where they don't have the capability to invest to do such expedited delivery. Look at Walmart today. Store orders up about 50% fulfilled from the store. A lot of that is done within three hours or less. A lot of them one hour or less, and Walmart's even doing thirty minute deliveries. So if you have that capability, you're definitely gaining share. It's expensive. It takes a long time to build. You'll get hit with higher fuel cost in the process. But at the end of the day, it seems like a net net winning strategy that you get all this share accumulated, and it's pretty sticky.

[00:04:25]Stock is down by 2% so far this morning. David, good to see you.

[00:04:28]Thanks for being here.