Is WMT stock a buy on falling earnings?

• walmart (NYSE:WMT) closed down 11% today after the announcement of first quarter results
• The company announced a substantial drop in earnings compared to analysts’ expectations
• Walmart has adjusted its full-year outlook to reflect lower expected profits

Walmart is well in the red today after reporting a sharp shortfall this morning. WMT stock is posting losses of more than 11% after reporting a 25% year-on-year (YOY) decline in quarterly earnings.

This morning, the retail giant presented its first quarter financial results. For the period, the company reported earnings per share (EPS) of $1.30, well below consensus estimates of $1.48 per share. It was the company’s first failure in five quarters, largely due to rising costs.

Walmart management said the decline in profits was a surprise — and a partial consequence of shifts in consumer habits amid the market pullback this year. With inflation soaring, Walmart has reported that low-income shoppers are turning to lower-priced foods, which offer lower returns. President and CEO Doug McMillon commented on the quarterly performance:

“The end results were unexpected and reflect the unusual environment. Inflation levels in the United States, particularly in food and fuel, created more pressure on the margin mix and operating costs than “We never expected. We are adapting and balancing our customers’ needs for value with the need to drive earnings growth for our future.”

Walmart reported a 3% increase in same-store sales in the United States during the first quarter. Meanwhile, gross margins at its U.S. stores declined slightly due to higher fuel and delivery costs.

The company also adjusted its full-year 2022 earnings outlook. It now expects a 1% decline in EPS, worse than its previously expected “mid-single-digit increase” in earnings.

WMT stock falls on strong trading day

This news may come as a surprise to some WMT stock investors, especially after U.S. e-commerce data released earlier today showed a strong nearly 1% increase in retail sales in April. Walmart’s plunge also comes on an otherwise strong day for the markets. the S&P500 and Nasdaq Compound each gained more than 2% today.

Walmart has generally been immune to the cold snap that hit the markets; prior to today’s decline, the company was up this year. Indeed, WMT has been one of the few bright spots for an S&P 500 which is down nearly 15% year-to-date (YTD). The 11% losses in WMT shares mark one of the worst trading days for the retailer in recent memory.

As of the date of publication, Shrey Dua does not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.