Morning Note: Market news and updates from Walmart and Alibaba.

Market News

The US dollar fell against major currencies, with the yen and Swiss franc among the beneficiaries. The 10-year Treasury yield was slightly lower (4.41%) after declining 10 basis points yesterday, as traders priced in two Federal Reserve rate cuts this year. Gold rallied off its recent lows and currently trades at $3,210 an ounce.

Equity markets were more subdued as the large moves earlier in the week driven by the US-China tariff truce moderated. The FTSE 100 is currently 0.4% higher at 8,669, while Sterling trades at $1.310 and €1.1880.

US equities were mixed last night: S&P 500 (+0.4%); Nasdaq (-0.2%). Investors turned more cautious ahead of Donald Trump’s trade war, 13F filings showed. Michael Burry’s fund liquidated most of its listed equity portfolio in the first quarter and bought put options on Nvidia and China-related stocks. Berkshire Hathaway made no major purchases and instead sold off holdings in financial stocks last quarter.

In Asia this morning, the main indices were also mixed: Nikkei 225 (+0.1%); Hang Seng (-0.5%); Shanghai Composite (-0.5%). Japan’s economy shrank a more-than-expected 0.7% in the first quarter on an annualised basis, illustrating its vulnerability ahead of Trump’s tariffs. Japan’s Finance Minister Katsunobu Kato aims to discuss currency matters with Scott Bessent next week.

Hopes faded for Russia-Ukraine talks set to take place today in Istanbul. The focus will now shift to when Trump may meet Vladimir Putin, and whether the US would announce fresh sanctions against Moscow.

Source: Bloomberg

Company News

Yesterday lunchtime, Walmart released results for the three months to 2 May 2025, the first quarter of its financial year to 31 January 2026. Earnings were ahead of market expectations, but the group held back from providing profit guidance for the current quarter given the uncertain outlook in light of tariffs. In response, the shares were initially marked down by 5% although they recovered to end the session little changed.

Walmart operates more than 10,750 stores and numerous e-ecommerce websites under 46 banners in 19 countries. In the face of strong competition, the group’s strategy is ‘to lead on price, invest to differentiate on access, be competitive on assortment, and deliver a great experience’.

During the three months to 2 May, total revenue increased by 4.0% on a constant currency (CC) basis to $165.6bn, in line with the market expectation.

In the US, comparable sales increased by 4.5% (ex-fuel) to $112.2bn, with strong growth in health & wellness and grocery. Growth was made up of a 1.6% increase in transactions (i.e., volume) and 2.8% rise in average ticket (i.e., price). E-Commerce sales grew 21%, led by store-fulfilled pickup & delivery and marketplace. Sam’s Club, the trade business, generated revenue of $19.7bn, up 6.7% in comparable terms (ex-fuel).

Outside of the US, the international business grew by 7.8% at CC to $32.1bn. Global eCommerce sales up 20%, led by store-fulfilled pickup & delivery and marketplace. Advertising business grew 20%, led by Flipkart.

Gross margin rose by 12 basis points in the year to 24.2%, led by the US, driven by lower mark-downs and improved business mix. The group kept a tight rein on costs – adjusted operating expenses as a percentage of net sales grew by only 6 basis points to 20.8%. As a result, adjusted operating income rose by 3.0% at CC to $7.1bn. Adjusted EPS was up 1.7% to 61c, ahead of the market expectation of $58c.

The group generated free cash flow of $0.4bn to leave net debt at $43.6bn. Global inventory was up 3.8% to $57.5bn. The company highlights that in-stock levels are ‘healthy’. Excess cash is returned to shareholders through dividends and buybacks. During the quarter, the group bought back $4.6bn of its shares, leaving $7.5bn of its $20bn repurchase authorisation. In the last financial year, the dividend was increased by 13% to $0.94, the largest increase in over a decade, equating to a yield of 1%.

As the largest importer of container goods in the US, Walmart is heavily exposed to tariffs and looking ahead the company warned it will have to start raising prices later this month due to the high cost of tariffs. The company has issued guidance for the second quarter with net sales expected to increase 3.5% to 4.5% in constant currency. However, the company declined to provide a profit forecast for the quarter.

Guidance for financial year to January 2026 remains unchanged. The company still expects consolidated net sales growth of 3%-4% at constant currency and operating income growth of 3.5%-5.5%, including a headwind of 150 basis points from the acquisition of VIZIO and lapping leap year. Adjusted EPS is expected to come in at $2.50-$2.60.

Source: Bloomberg

Yesterday lunchtime Alibaba released results for the financial year to 31 March 2025. The earnings were slightly below market expectations and in response the shares were marked down by 7%.

Alibaba Group is China’s leading e-commerce company established in 1999 by a small team led by Jack Ma. China has the world’s largest Internet population with 1.1bn users, and China’s e-commerce penetration is one of the highest in the world at around 28% of total consumer retail.

The ecosystem developed around the group’s platforms and businesses consists of consumers, merchants, brands, retailers, third-party service providers, strategic alliance partners, and other businesses. This provides a strong self-reinforcing network effect giving the company comprehensive data on more than half a billion customers, including their transaction history, financial position, and social interests.

In addition to the core e-commerce business (i.e. Taobao and Tmall Group), Alibaba Cloud is the world’s fourth largest and Asia Pacific’s largest infrastructure-as-a-service provider, and China’s largest provider of public cloud services. Alibaba also owns 33% of Alipay owner Ant Group, providing exposure to digital payment services.

After a period of underperformance, a new management team has embarked on a strategy to focus on profitable growth as opposed to growth at any cost and isn’t deploying capital into new business lines. The focus is on core e-commerce services, investment in cloud technology, and exit from non-core businesses. There is also a commitment to improving shareholder returns, all of which underpins a stronger growth outlook.

The e-commerce business has returned to growth after a period of intensified competition and share loss. Steadily increasing online penetration in segments such as grocery and FMCG remains a long-term driver for the business, whilst the company is integrating live streaming and social media to revitalise the platform.

During the year to 31 March 2025, revenue grew 6% to RMB 996bn ($137.3bn). In the final quarter, revenue was up 7% to RMB 236bn ($32.6bn), in line with the consensus expectation.

Almost half of the group’s revenue is generated by the Core Commerce business (Taobao and Tmall Group), which grew by 9% in the final quarter to RMB 101bn ($14.0bn) as a result of initiatives to enhance user experience and effective monetisation.

The division is split into retail and wholesale. China Commerce Retail, the largest retail commerce business in the world in terms of gross merchandise volume, grew by 8% to RMB 96bn ($13.2bn) in the latest quarter. China Commerce Wholesale (1688.com, China’s largest integrated domestic wholesale marketplace) grew by 17% to RMB 5.8bn ($798m).

Alibaba International Digital Commerce Group comprises the retail and wholesale platforms serving global buyers and consumers (including AliExpress). During the latest quarter, revenue grew 22% to RMB 33.6bn ($4.6bn), primarily driven by strong performance in cross-border businesses.

The Cloud Computing division grew 18% to RMB 30.1bn ($4.2bn), driven by an even faster public cloud revenue growth, including the increasing adoption of AI-related products which achieved triple-digit growth for the seventh consecutive quarter.

Cainiao Smart Logistics Network, the global logistics operation, saw a 12% decline in revenue to RMB 21.6bn ($3.0bn). Digital Media and Entertainment grew 12% to RMB 5.6bn ($765m). The Other Revenue division grew 5% to RMB 54.0bn ($7.4bn), mainly due to the increase in revenue from retail businesses including Freshippo and Alibaba Health.

Adjusted operating profit (or EBITA) increased by 5% in the year to RMB 173bn ($23.8bn), with non-GAAP diluted earnings per ADR grew by 5% to RMB 65.41 ($9.01).

In the final quarter, EBITA was up 36% to RMB 32.6bn ($4.5bn), primarily attributable to revenue growth and improved operating efficiency, partly offset by the increase in investments in the e-commerce businesses and technology. Non-GAAP diluted earnings per ADR grew 33% to RMB 12.52 ($1.73), below the market forecast of RMB 12.94.

Free cash flow was down 53% during the year to RMB 73.9bn ($10.2bn), mainly due to the increase in cloud infrastructure expenditure, partly offset by year-over-year increase of adjusted cash profit.

During the year, the company made significant non-core asset sales (Sun Art and Intime), share buybacks ($11.9bn in the year), and extended debt maturities at attractive rates. The company achieved a 5.1% net reduction in outstanding shares and approved the distribution of annual and special dividends totalling $4.6bn.

Looking forward, the group is confident in its business outlook and will continue to invest in is core businesses to strengthen its competitive advantages.

Source: Bloomberg