WSJ What’s News - Walmart Sales Warning Unsettles Investors

Episode Date: February 20, 2025

P.M. Edition for Feb. 20. Walmart reported bumper earnings from the fourth quarter, but offered a note of caution in its forecast of the year ahead, sending U.S. markets sliding. WSJ reporter Sarah Nassauer joins us to discuss what the company sees for the year ahead. Plus, the U.S. electrical grid is in need of an update, and President Trump’s tariffs could make that even more expensive. We hear from WSJ Heard on the Street columnist Jinjoo Lee about a potential chokepoint that could affect customers’ electric bills. And the Broccoli family resolves its dispute over the James Bond franchise and grants creative control to Amazon MGM Studios. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Register by March 15th. Additional terms apply. Learn more at wealthsimple.com slash match. Walmart posts strong fourth quarter earnings, but lowers its outlook for the year ahead. Plus, how President Trump's threatened tariffs could shock America's power system and your electric bill. Electricity bills could keep getting more expensive.

Utility bill inflation was already pretty high over the past five years, and more expensive grid components would just add to that. And Republican Senator Mitch McConnell says this term will be his last. It's Thursday, February 20th. I'm Alex Oscele for The Wall Street Journal. This is the PM edition of What's News, the 20th. I'm Alex Osola for the Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move

the world today. For many Americans, prices for everyday goods like eggs and coffee have been stubbornly high. That's good news for Walmart, the country's biggest grocer. The company posted boosted fourth quarter profits this morning. Its approximately $181 billion in total revenue met Wall Street's elevated expectations.

But executives paint a slightly less sunny picture for the year ahead, with numbers lower than analysts anticipated. Sarah Nassauer covers large retailers for The Wall Street Journal and is here to tell us more. Sarah, you write that analysts said the latest quarterly results showed how Walmart has been able to build its business. What are some of the ways it's done that? It's really multi-pronged as these things usually are.

Walmart is known for low prices. That happens to be a great message when we've lived through a period of inflation. So that's been a big boost for Walmart. But in addition, they've spent a lot of time improving their e-commerce services. So you can get faster delivery, you can get more products delivered, you can pick up and store parking lots, they started pharmacy delivery. And those things have also really resonated with people that just are looking for something that's a little bit more convenient. And yet the revenue and profit targets that the company set for 2026 are below analysts' expectations. What's going on there? They said that they were being a little cautious that this is a year of a lot of uncertainty. We've all seen headlines,

tariffs are something that would have a huge impact on a retailer like Walmart. And so they said while they're anticipating pretty steady sales growth for this year, they're putting those estimates a little bit more on the cautious side. So does that mean consumers won't be buying as much overall this year? No, not necessarily. Their sales estimates for the year are about the same as they were for this year. So that means that they'll be up a little bit over this year. They say that consumers are behaving exactly the same as they have been for many quarters now, which is cautiously in some ways, right,

back to the inflation thing. People don't have that much money to spend in some cases, but they're still spending. The other big dynamic that's happening with Walmart is they're gaining market share with higher income shoppers. Higher income shoppers are households they define as earning $100,000 or more a year.

And they're grabbing more of those folks and that's helping them grow as well. That was Journal reporter Sarah Nassauer. Thank you, Sarah. Thanks for having me. The note of caution in Walmart's forecast unsettled investors. Major U.S. stock indexes slid today. The Dow dropped about 1 percent, the NASDAQ fell roughly half a percent, and the S&P 500 dipped around 0.4 percent. Walmart's own stock was down about

6.5 percent. In other news, the Broccoli family's feud with Amazon MGM Studios over the James Bond franchise appears to have reached a resolution. Barbara Broccoli and her stepbrother Michael Wilson, who have long controlled the 007 franchise, said in a statement with Amazon MGM Today that they reached an agreement to hand over creative control to a new joint venture with the studio. Amazon will now decide who will play Bond, who will write the next script, and when the film goes into production, three critical pieces that so far have been held up by a years-long stalemate. The company didn't disclose financial terms of the joint venture.

And Montreal transportation and logistics company TFI International plans to move its legal registration to the US from Canada. The move is a potential blow for the Canadian economy as companies consider whether to move operations southward amid President Trump's tariff threats. The company, which has been trading on the New York Stock Exchange since 2020, said the corporate transition should be completed in 9 to 12 months. Coming up, how Trump's proposed tariffs could make upgrading the U.S. electric grid even costlier.

That's after the distractions. And that's not all. New Galaxy AI features, like NowBrief, will give you personalized insights based on your day schedule so that you're prepared no matter what. Buy the Samsung Galaxy S25 Ultra now at Samsung.com. We've talked a lot on the show about how the U.S. power grid is in need of an upgrade. That includes transformers, one of the most important elements of the grid. The National Renewable Energy Laboratory estimates that about 55 percent of transformers currently in use are older than 33 years and are approaching the end of their life. Now, tariffs may further complicate this effort to update the grid. I'm joined now by Heard on the Street columnist Jinju Lee. Jinju, what is a transformer and how could they be affected by tariffs?

Where do they come into this? So transformers are a critical element of the grid. They step up voltage so that power can travel long distance. And they are also responsible for stepping down voltage closer to where power is distributed to consumers like households and businesses. Basically, the electricity system cannot function without them. Because of supply chain issues and just heightened demand, transformer prices have already been increasing a lot over the last few years. Wood Mackenzie research firm estimated that transformer

prices have increased 70 to 100% since January 2020. So they have already been getting expensive, but tariffs would probably make it even more expensive. The US depends a lot on China, Canada, and Mexico for transformer imports. So far, the Trump administration has only imposed 10% across the board tariffs on China. But if he goes ahead with the plan to impose 25% tariffs on Canada and Mexico, then transformer prices could increase by another 8%.

What are transformers actually made of? They include copper. That's also something that might be tariffed. And they also use a fair bit of electrical steel. All right, tariffs on these various elements for transformers could pile on new cost pressures for this already tight grid. What does that mean for consumers? So for consumers, this means electricity bills can keep getting more expensive.

The electricity prices have already been rising faster over the last five years than they have been previously. And last week, the New Jersey Board of Public Utilities actually said its residential customers can expect to see their average monthly bill rise by 17 to 20 percent starting June. So consumers are already seeing quite a bit of price pressure. If more tariffs come our way, then that could possibly send prices even higher. That was heard on the street columnist, Jinju Lee. Thank you, Jinju.

Thank you. Another of President Trump's cabinet nominees was confirmed today. The Senate voted Cash Patel as the head of the Federal Bureau of Investigation. It's a marquee victory in President Trump's effort to strike back at an agency he has long considered his nemesis. Leading the FBI is a huge step in Patel's rapid career ascension, which includes stints as a public defender, a federal prosecutor, a top house staffer,

and in various national security roles during the first Trump administration. Critics question potential conflicts of interest in his owning shares of the parent company of fashion giant Shein following his stint in consulting. The stock could be worth millions if the company goes public. Here to tell us more is Dave Michaels,

who covers the Justice Department and corporate law enforcement for the journal. Dave, Patel has said he wouldn't participate in any matter that quote, has a direct and predictable effect on the financial interests of the company. What exactly is the potential conflict here? Cash Patel owns stock in Elite Depot, which is a parent company of Shein that's valued at between $1 million and $5 million.

It appears to be a material part of his net worth, according to the financial disclosure that he was required to make. And as FBI director, he will be getting paid those shares through the rest of 2025. So effectively, he'll be the FBI director and being paid by a private company that is actually a foreign company. And the concern is, well, why is the FBI director really invested in a foreign corporation and one that is really related to and tied to China, which is by all accounts a big US adversary? That seems a little bit unusual to a lot of observers, to people who worked in the Justice Department and in law enforcement, and seems to be a deviation from

the way that past FBI directors have handled the financial entanglements that they would otherwise bring to the job. So Patel has said that if he were to be confirmed as FBI director, he would sell his shares in Meta and Apple. Why not in Elite Depot? It's a really good question. A lot of the individuals who become members of the cabinet or really high level presidential appointees completely cut all their ties with the private

sector. Cash Patel is selling a lot of his individual stocks, but he's not selling this. Why is he not selling this? Well, right now he can't sell it. It's actually unvested equity. In most cases that we could report out, people who join the government or quit companies when their equity is unvested, they forfeit that equity. They don't get to keep it and let it vest. But there is an arrangement here in which the FBI allowed Cash Patel to keep this unvested equity, which will become available to him over the next 10 months.

That was WSJ reporter Dave Michaels. Thank you, Dave. Thanks for having me. Elsewhere in Washington, Kentucky Republican Senator Mitch McConnell said he wouldn't seek another term. McConnell, who turns 83 today, made the announcement from the floor of the Senate, where he has served since 1985. He closed out his speech with an appeal to focus on national security and with an emphasis

on the role played by the judiciary in upholding the law, two areas where Trump is challenging traditional Republican values. McConnell stepped down from his party leadership role at the end of the last Congress. His final Senate term ends January 2027. And finally, the feud between Elon Musk and OpenAI CEO Sam Altman is one of the most personal fights in recent business history with the potential for huge impact in the business world and beyond. Reporter Berber Jinn told our tech news briefing podcast What's at Stake.

On the political side, it's almost who gets to set the AI agenda with President Trump. And so the political stakes are huge. And in terms of the stakes for the future of the AI industry, it's essentially who gets to get control of what everyone is going after, which is artificial general intelligence, this idea of building an AI model that's so powerful that it eclipses anything a human can do. That's the sort of legacy stamp that all of these tech billionaires want. And that's part of the reason why they're all fighting each other and trying to undermine each other in this extremely high stakes race.

You can hear about how Musk and Altman went from friends to bitter enemies on tomorrow's episode of Tech News Briefing. And that's what's news for this Thursday afternoon. Today's show was produced by Anthony Bansi and Pierre Bienneme with supervising producer Michael Cosmitis. I'm Alex Osolo for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.