In contrast to the broad-based market rally yesterday, Walmart’s (WMT) shares dropped 1.64% as macro headwinds continue to impact the retailer. According to the Wall Street Journal, Walmart is shedding about 200 jobs in a restructuring push. Although the analyst consensus on the stock is still a Strong Buy, the stock price has dropped more than 9% year-to-date. As challenges mount, WMT stock does not seem ready to rise in the near future.
The development comes after Walmart issued a profit warning, with customers shying away from discretionary spending. The move is also part of a broader headcount streamlining across major names such as Meta (META), Google (GOOGL), Microsoft (MSFT), and most recently, Robinhood (HOOD).
The WSJ adds that the restructuring impacts verticals including real estate, merchandising, and global tech at the retailer. A combination of supply-chain challenges, changing consumer buying patterns, and inventory dynamics continues to surprise retail names, with Target (TGT) and Best Buy (BBY) scaling back profit expectations as well.
Street Remains Positive
Despite these headwinds, the Street remains favorable about Walmart with a Strong Buy consensus rating and an average price target of $144.55, which implies a 10.77% potential upside for the stock.
Hedge Fund Actions
Hedge funds, on the other hand, are jumping the ship. In the last quarter, hedge funds decreased holdings in the stock by 8.1 million shares, indicating a very negative confidence signal. Meanwhile, Ray Dalio’s Bridgewater Associates has upped its Walmart position by 42.4% to $600.45 million.
Closing Note
Rising inflation continues to take a toll on the purchasing power of customers. The massive job cuts, a price-to-sales ratio of 0.60, and a TipRanks smart score of 5 imply Walmart shares may not outperform the market anytime soon.
Read full Disclosure