Walmart Shines in Fourth Quarter, Especially Online
The retail giant is growing digital sales faster than expected.
Walmart Inc.’s shares rose 2.2 percent $102.20 in trading Tuesday after the retailer reported strong metrics for the fourth quarter and year ended Jan. 31.
Among the highlights: e-commerce sales shot up 43 percent in the quarter, prompting president and chief executive officer Doug McMillon to throw down the gauntlet competitors such as Amazon, warning that Walmart will be more aggressive.
The retail and e-commerce giant on Tuesday easily beat Wall Street the analyst consensus estimate for adjusted earnings of $1.33 per share for the quarter, posting $1.41 per share. Walmart U.S. logged its strongest comp-store sales growth in nine years, 6.8 percent, when measured on a two-year stack. (U.S. comp sales rose 4.1 percent for the quarter, compared with a year earlier.)
Total revenue increased 1.9 percent to $138.8 billion in the recent fourth quarter, from $136.3 billion. Full-year revenue increased 2.8 percent to $514.4 billion from $500.3 billion in fiscal year 2018.
Net income rose 69.5 percent to $3.68 billion in the fourth quarter, from $ 2.18 billion in the year ago period. For fiscal year 2018, net income declined 32.4 percent to $6.67 billion from $9.86 in the prior year.
McMillon in a conference call said the strength of the U.S. business, including e-commerce sales, “exceeded our expectations.”
“We leveraged operating expenses even as we invested in e-commerce and wages,” the ceo said. “We’re expanding product reviews and on-time delivery. We have a superior value proposition as we compete aggressively on price. We’ll play offense as we continue to innovate in e-commerce.”
“Jet.com is focusing on urban markets,” McMillon said. “We’re very pleased with the role it’s playing in attracting new brands. We’re looking constantly at acquisitions.“
But the rate of bringing new brands online to walmart.com isn’t as fast as McMillon would like.
“We’re trying to build an apparel, home and hardlines business that brings customers back,” he said. “What’s taking longer is building merchandise assortments, including the brands we want to add to where it builds into a healthy business online. We’re disappointed it’s taking as long as it is.”
Yet, the retailer is seeing improvements in apparel with its private brands, McMillon said, referring to the Ellen DeGeneres line and the new Sofía Vergara collection. The Bentonville, Ark.-based behemoth has been transforming its digital shopping. Ten months ago it relaunched the home category with an emphasis on higher quality and trend-right products, editorial-style images. Apparel was reimagined last spring with elevated photography and a storefront for Lord & Taylor.
“We have this merchandising capability to grow health and wellness to where we have the opportunity to be more important in that space.”
The retailer reiterated its guidance for 2019, with Walmart U.S. comps growing 2.5 percent to 3 percent excluding fuel, and Sam’s Club expanding about 1 percent. Walmart U.S. e-commerce is expected to grow net sales by about 35 percent, Walmart International net sales, about 5 percent.
McMillon addressed the Indian government’s new rules prohibiting e-tailers from selling products of companies in which they have stakes, which came into effect Feb. 1. Walmart last year paid $16 billion for a 77 percent stake in India’s largest online retailer. The ceo said Walmart has the ability to navigate changes in the international business, but is hoping for an open dialogue with the government.