Economic Challenges Cloud Walmart and Amazon’s Q1 Outlook
Both Amazon and Walmart are bracing for potential difficulties in the first quarter of 2025, according to recent earnings calls. The retail giants are signaling a more cautious outlook than analysts anticipated, attributing the slowdown to a combination of economic factors.
Amazon projected revenue between $151 billion and $155.5 billion for Q1, falling short of the $158 billion forecast. Walmart’s anticipated U.S. sales growth of 3% to 4% also disappointed, as analysts had expected a stronger performance. Key factors influencing the revised guidance include inflation, waning consumer demand, and the impact of foreign exchange fluctuations.
“Uncertainty seems to be the buzzword of earnings calls,” stated Neil Saunders, managing director of retail at GlobalData, in an interview with PYMNTS. “Retailers are very apprehensive about various policy aspects, particularly tariffs. They are worried about the potential cost implications for their businesses, and the potential dampening effect higher prices could have on spending. We are clearly seeing this reflected in the latest guidance.”
Saunders added that some “low-balling to manage expectations” might be at play, but emphasized there is genuine concern demand could weaken significantly. He also pointed out the challenges of planning in an environment where policies are subject to change or delays, making accurate forecasting difficult.
RetailBoss founder and CEO Jeanel Alvarado highlighted the effects of inflation on consumer behavior, noting customers are becoming more strategic with their spending. “Consumers feel the pinch of inflation, shifting their focus to essentials like groceries and health products while cutting back on discretionary items like apparel and electronics,” she explained. “For shoppers, this means fewer splurges and more strategic spending. This behavior change has directly contributed to a ‘soft’ Q1 for both Amazon and Walmart, as demand for higher-margin discretionary goods weakens.”
Alvarado also predicted that tighter budgets will result in retailers emphasizing essential promotions and loyalty programs rather than offering discounts on non-essential items, as they compete to attract customers’ dollars.
Recent Developments at Amazon
- Alexa+ Launch: Amazon debuted Alexa+, its generative AI-powered virtual assistant on February 26, 2025. The launch comes more than a year after the initial announcement, highlighting the complexities involved with integrating AI. The company’s experience echoes the challenges faced by Apple with its Siri AI features.
- Inspire Shutdown: Amazon discontinued its social commerce feature, Inspire, on February 18. Launched in 2022 as a platform for product-focused photos and videos, Inspire struggled to maintain user engagement. The shutdown comes after Amazon launched it’s AI-powered shopping assistant, Rufus, in 2024, which will now take over many of Inspire’s functions.
Walmart’s E-commerce Growth Continues
Walmart’s latest earnings report revealed positive developments in its e-commerce sector. In the U.S., e-commerce sales grew by 20%, driven largely by store-fulfilled pickup and delivery services. Globally, e-commerce increased by 16% overall.
Notably, over 30% of Walmart’s online orders in the third quarter of the prior year included a fee for expedited delivery, and many customers opted for same-day or next-day shipping. As a result, Walmart experienced a 20% rise in orders per delivery.
Walmart Restructures Post-Audit Process
Walmart is streamlining its post-audit process, moving to a single firm, Audit Partners Limited, for all audits beginning in fiscal year 2025. The transition is intended to improve transparency. This is to come after a report was released on February 13th stating that the move has raised concerns about the efficiency of a sole auditor depending on automation and outsourced workers. The report also details that suppliers may face issues with the new web portal, High Radius, and could see claims go unnoticed. Walmart is changing how it calculates defective allowances, according to the report.
