Caution Clouds Walmart and Amazon Outlook as Shoppers Tighten Budgets

Core Insights - Amazon and Walmart are preparing for a challenging Q1 earnings season, with cautious outlooks due to persistent inflation, weak consumer demand, and foreign exchange challenges [2][8] - Consumer spending has declined significantly across various retail categories, with a 12% drop in apparel and a 22% drop in athletic footwear compared to the previous year [3] - Both companies are experiencing shifts in consumer behavior, prioritizing essential purchases over discretionary items due to high inflation [3][6] Company-Specific Insights - Walmart's CEO noted that lower-income consumers are particularly affected by rising food prices, leading to more selective purchasing behaviors [3] - Walmart is facing adverse currency movements and margin pressures, despite raising its fiscal 2025 guidance [3] - Amazon's projected Q1 2025 revenue is between $151 billion and$155.5 billion, which is below expectations, reflecting concerns about inflation and consumer spending [3] Market and Economic Context - Tariffs are impacting retailers, with Walmart being particularly vulnerable due to its status as the largest U.S. importer of containerized goods [4][5] - Inflation is leading consumers to focus on value-driven purchases, with a shift towards essentials like groceries and health products [6] - Despite challenges, Amazon surpassed Walmart in quarterly revenue for the first time, reporting $187.8 billion compared to Walmart's$180.5 billion [6] Stock and Performance Insights - Walmart's stock has experienced volatility following a mixed Q4 earnings report, with shares dropping after providing softer-than-expected guidance for Q1 2025 [7] - Both companies are adapting to changing consumer behaviors, which will be crucial for navigating economic headwinds [9]