Walmart highlights fashion strength while navigating macroeconomic headwinds

The US-based retail giant Walmart concluded fiscal year 2026 with record annual revenue of 713.16 billion dollars, marking a 4.7 percent increase (5.1 percent in constant currency). Despite achieving standalone profitability in its e-commerce segment, management emphasized a balanced outlook for fiscal year 2027, factoring in significant legislative and economic pressures.

Resilience in fashion and higher-income segments

A defining highlight for the quarter was the performance of the fashion category, which led low single-digit growth in general merchandise for Walmart US. President and chief executive officer John Furner characterized fashion as a "bright spot" in both physical and digital channels. This success is increasingly driven by higher-income households; the majority of market share gains this quarter came from households earning over 100,000 dollars.

Strategic headwinds and conservative guidance

While headline figures were strong, the investor call revealed several areas of operational caution. The company anticipates a 100 basis point (bps) headwind for the full year due to Maximum Fair Pricing (MFP) legislation affecting branded drug prices and furner noted that for households earning below 50,000 dollars, wallets remain "stretched," with some consumers managing spending paycheck to paycheck.

Chief financial officer John David Rainey highlighted that full-year adjusted operating income growth of 5.4 percent was tempered by a 300 bps headwind from increased claims expenses and a "bumpy tariff environment".

Operating income growth for the first quarter of fiscal year 2027 is expected to be lower than in subsequent quarters, partly due to the timing of expenses and year-over-year tariff impacts.

Digital acceleration and advertising momentum

E-commerce remains a primary engine for growth, with global digital sales increasing 24 percent for the year. In the US, e-commerce grew 27 percent, supported by the group’s omnichannel strategy that leverages its physical stores as fulfillment hubs. Approximately 50 percent of fulfillment centre volume is now automated, contributing to improved inventory management, which ended the year up 2.6 percent, roughly half the rate of sales growth.

The group’s global advertising business, which includes the US-based retail media network Walmart Connect, grew 46 percent for the full year to nearly 6.40 billion dollars. This figure includes contributions from the US-based electronics firm Vizio, which Walmart acquired in December 2024 for approximately 2.30 billion dollars. Walmart Connect alone saw a 41 percent increase in the fourth quarter, as the company seeks to integrate Vizio’s SmartCast operating system into its advertising infrastructure.

Despite these advances, the company remains "measured" in its outlook. Rainey stressed that while they are constructive on the economy, subdued consumer sentiment and other macroeconomic indicators require a conservative posture to maintain "maximum flexibility"