MW The 'most important consumer earnings report of the season' lands this week

By Bill Peters

Earnings Watch: All eyes will be on Walmart's results this week

In April, when President Donald Trump escalated his trade war, Costco Wholesale Corp. $(COST)$, at least, managed to put up a sales gain. Amazon.com Inc. $(AMZN)$ said it hadn't yet seen any impact from tariffs, while Mattel Inc. $(MAT)$ temporarily stopped trying to forecast their effects. Restaurants have said diners are more cautious, and imports are starting to fall.

But on Thursday, we'll get the most direct look yet at how shoppers are faring when big-box retail and e-commerce giant Walmart Inc. $(WMT)$ reports first-quarter results.

D.A. Davidson analyst Michael Baker has called Walmart's report on Thursday the "most important consumer earnings report of the season." And amid enduring anxieties over a possible recession, he said the results and outlook loom even larger for investors than normal.

"What they say is going to matter, not just only for Walmart but for how investors view the overall consumer economy - even more so now, because there's just so many questions as it relates to what's going on with tariffs on both the supply and the demand side," Baker said.

In February, Walmart forecast its first year-over-year decrease in quarterly profit in three years, as worries grew about the U.S. economy and the effects of higher costs on American consumers. Still, the stock is up roughly 60% over the past 12 months, as Wall Street expects bigger store chains to fare better than smaller competitors when shoppers struggle.

Walmart's actual results for the quarter itself probably won't matter as much as its outlook and what executives say about trends on the ground. Baker said that, at least through March and April, retail-sales data appeared to be solid. The timing of Easter and efforts to stock up ahead of the tariffs might have helped those sales, but he noted that job-market data, at least for now, had held up.

"The consumer is concerned about tariffs, and you see that in the consumer-sentiment data," he said. "But employment is pretty strong. People have jobs and, generally, that's the biggest driver of actual spending."

Other companies have also offered clues. Costco's April sales were up 7%, the company said last week. Amazon this month said it hadn't yet seen any "attenuation of demand," adding that most sellers on its e-commerce platform hadn't changed prices yet. Amazon also said its vast network of merchants who sell things on its site could offer customers a bigger opportunity to hunt for potential deals.

As for the supply, there will be questions about how much stuff Walmart already has stored in its U.S. warehouses, stockrooms and store shelves. There could also be questions about the degree to which the company can or wants to order more, as tariffs threaten to raise the cost of importing and ultimately push prices higher for consumers. Baker said that the chain has around four to six weeks' worth of product on hand at any given time.

Walmart, in its latest annual report, said that a "significant portion" of its general merchandise - the things it sells that aren't groceries or health-related products - in its U.S. stores is made outside the U.S. However, thanks to its size, Walmart has more leverage with its suppliers to ultimately keep prices lower for shoppers.

More broadly, Wall Street will be looking for signs that companies are importing less. Over recent days, fewer container ships have been docking at the ports of Los Angeles and Long Beach, which take in a huge chunk of inbound shipments from Asia, according to data from the Marine Exchange of Southern California.

But U.S. trade relations with other countries could change at any moment. While most of the U.S.'s steeper nation-specific tariffs remain on pause, with imports subject only to 10% baseline tariffs for now, China has not been spared - with U.S. tariffs on most goods from the world's second-large economy standing at 145%.

But Trump, on Friday, said that a relatively lower 80% tariff on products from China "seems right." However, he said it was up to Treasury Secretary Scott Bessent to decide on the exact rate. U.S. officials are set to meet with Chinese officials in Switzerland over the weekend for trade talks.

This week in earnings

Twelve S&P 500 companies report results during the week ahead, according to FactSet.

Earnings from Deere & Co. (DE) could offer some sense of the trade war's impact on farming. Results are also due from videogame maker Take Two Interactive Inc. $(TTWO)$, after Electronic Arts Inc.'s $(EA)$ report showed what Oppenheimer analysts described as "new momentum." Fast-casual restaurant chain Cava Group Inc. $(CAVA)$ shares its results, after Chipotle Mexican Grill Inc. $(CMG)$ warned of consumer caution. Elsewhere, online education company Chegg Inc. (CHGG) reports.

The call to put on your calendar

Cisco Systems Inc.: Tech-infrastructure giant Cisco $(CSCO)$ reports quarterly results on Wednesday. Executives seem likely to offer their thoughts on quantum computing and artificial intelligence, following an acceleration in product orders. Still, analysts have their doubts about the cost and eventual payoff for both technologies.

UBS analysts, in a note last week, also said they'd be focused on the state of the company's business with the federal government, which Trump has tried to shrink. However, those analysts said that the exposure, representing around 10% of Cisco's sales, was "manageable."

The numbers to watch

Golf, footwear sales: Topgolf Callaway Brands Corp. $(MODG)$ - which, for now, both runs the golf and entertainment chain Topgolf and sells Callaway golf equipment - reports during the week. Those results could provide some indication of how trade-war and inflation anxieties have filtered through to leisure activities, and what actions the company might take to address any resulting supply issues.

Topgolf Callaway, in its annual report, noted that a "significant amount" of its products were made in Mexico, China, Vietnam and Bangladesh. But other trends could boost the company's bottom line; Jefferies analyst Randal Konik, in a note last month, said "industry consolidation and favorable demographic trends are expected to boost pricing and golf participation." The company plans to separate Topgolf from its business, potentially later this year, and Konik said he believed the stock - which is down more than 50% over the past 12 months - had "found a bottom."

The trade war's impact also looms large for the footwear industry. German sandal and clog maker Birkenstock Holding $(BIRK)$ also reports during the week, after raising prices. Western- and workwear retailer Boot Barn Holdings Inc. $(BOOT.UK)$, which makes a lot of its merchandise outside the U.S., will also share results.

-Bill Peters

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May 11, 2025 10:00 ET (14:00 GMT)

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