Strong Walmart earnings may already be priced in with shares near record

) earnings amid signs of weaker discretionary spending could add fuel to a rally that has propelled its shares to record highs, or potentially spook investors looking to justify the heavyweight retailer’s pricey valuation.

Shares of Walmart recently traded at about 25 times expected earnings, up from a 10-year average valuation of about 20, suggesting investors expect strong profit growth, according to LSEG data. Walmart replenished its inventories at a slower rate than some of its peers, according to LSEG data for the fiscal quarter ended January 31. Both Kroger and Costco showed better inventory turnover than Walmart, according to LSEG data for their latest fiscal quarters. High inventory levels potentially raise Walmart’s costs, jeopardizing its profit margins.

B. Riley Wealth’s chief market strategist Art Hogan said he expects Walmart’s shares to trend higher if it beats revenue and earnings estimates on Thursday.

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