While Walmart Inc. has experienced a notable stock selloff today, savvy shareholders may have anticipated this based on the performance of its bonds in recent weeks. BondCliQ Media Services, a data solutions company, reports that Walmart's bonds have seen net selling despite tightened spreads.
Costco Wholesale Corp. is in a similar situation, as its stock fell alongside Walmart's on Thursday. This drop occurred after Walmart's CEO, Doug McMillon, expressed his expectation of a deflation trend in the U.S. in the coming months during an earnings call. Notably, McMillon is the first retail executive this season to raise concerns about deflation.
Although Walmart exceeded third-quarter earnings expectations, it disappointed investors with its per-share earnings guidance, which fell below consensus. Consequently, the stock plunged over 7%. The following charts illustrate the trends observed in Walmart and Costco bonds leading up to today's market figures.
Bondholders, who lend money to companies through corporate bonds, are particularly attentive to a company's financials and key metrics like cash flow. They seek reassurance that their investment will be repaid in full upon maturity. Conversely, shareholders focus more on daily stock price fluctuations.
The first chart depicts the volume of bond trades over a two-week period, categorized by trade type. Meanwhile, the subsequent chart presents net selling for both Walmart and Costco bonds over the same period.
By monitoring bond activity and related market trends, shareholders can gain valuable insights into the overall performance and potential future fluctuations of a company's stock.
Walmart's Sales Decline as Spreads Tighten
The latest numbers from Walmart indicate a decline in sales, coinciding with tighter spreads in the market. This trend is consistent with what other retailers have been experiencing this week, as customers exhibit caution, particularly when it comes to big-ticket purchases.
Target Corp. also reported lower sales figures on Wednesday, with Chief Executive Brian Cornell highlighting soft industry trends in discretionary categories and an increase in inventory shrinkage.
Similarly, Home Depot Inc. noted a reluctance among customers to make big-ticket purchases during their recent earnings conference call. CEO Ted Decker highlighted continued consumer focus on smaller projects and acknowledged the pressure in certain discretionary categories.
As a result of these developments, Costco, Home Depot, and Target saw their stocks decrease by 2.5%, 0.7%, and 0.2% respectively. The SPDR S&P Retail exchange-traded fund (XRT) also experienced a decline of 3% but has still managed to gain 2% year-to-date. In comparison, the broader S&P 500 index has seen a 17% increase.
It is worth noting that Walmart's sales decline reflects a larger industry-wide trend, further highlighting the challenges faced by retailers in the current economic climate.
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