Walmart earnings call foreshadows challenges ahead for retailer

Walmart's fourth-quarter earnings results were a mixed bag.

The mega-retailer reported $164 billion in revenue compared with $160 billion analysts surveyed by FactSet forecast. That's a 7.3% year-over-year gain. 

The jump in revenue last quarter came from solid sales over the holiday season and food shopping which was particularly strong, Walmart executives said on the company's earnings call Tuesday morning. 

But all is not well for the largest retailer in the nation by revenue.

Like many of its competitors, it's struggling to woo cash-strapped consumers into buying nonessential goods like toys, electronics and clothing. 

That said, "customers are still spending money," Walmart Chief Executive Doug McMillon told analysts. "It's obviously not as clear to us what the back half of the year looks like," he added that consumers are "making choices."

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Recession risk

The uncertainty McMillon cited is a product of the unclear state of the economy.

Most economists last year were predicting that the U.S. would enter a recession in 2023, but some are questioning whether it will occur since the unemployment rate is hovering at a historically low level. Yet credit card debt hit a new high of nearly $1 trillion, a reflection of persisting inflation eating into consumers' paychecks. 

To combat inflation the Federal Reserve has been raising interest rates, which makes it more expensive for consumers to pay off credit card debt, among other debts. 

While inflation has started to come down from the summer, when it peaked at 9.1%, it remains too high, according to the Fed. That along with last month's surprisingly strong employment data is likely to prompt the central bank to continue hiking rates longer than many economists expected. However, that amplifies the risk of a recession, which so far the Fed has been able to avoid.

That's why Walmart said it's making conservative forecasts for sales growth and other key metrics in the upcoming year.

Walmart stock

Investors initially weren't pleased by the cautious guidance Walmart delivered. The company's stock fell by 4% before markets opened. But as of 11:20 a.m. EST, the stock was up nearly 1%.

Elisabeth Buchwald is a personal finance and markets correspondent for Paste BN. You can follow her on Twitter @BuchElisabeth and sign up for our Daily Money newsletter here