Walmart: Best 4th quarter in ten years
Walmart Inc posted its strongest holiday quarter in ten years, improved by higher grocery and e-commerce sales. Online sales jumped 43 percent, helped in particular by the expansion of Walmart’s online grocery pickup program to more than 2,100 stores.
The news of growth in all channels was well received by the market, which sent the shares up 2.2 per cent on the positive news.
So far in 2019, share values have increased by almost 10 per cent.
“We still feel pretty good about the consumer. The data we are seeing still looks healthy. Gas prices are down year over year, which helps,” Walmart CFO Brett Biggs told Reuters.
“There are definitely some storm clouds on the horizon,” says Charles Sizemore, founder of Sizemore Capital Management LLC, which owns Walmart shares.
“A big example would be delinquent loans in the auto sector which are rising. The consumer may be on hard times and in 2008 that was the prelude to the global economic slowdown.”
Adjusted earnings per share increased to $1.41 per share, beating expectations of $1.33 per share, according to Refinitiv. But the retailer’s gross margins declined for the seventh consecutive quarter due to higher transportation costs and e-commerce investments.
Online sales jump – but no profit yet
Walmart’s 43 percent rise in online sales matched the previous quarter’s increase, and the company credited a broader assortment on its website and improved delivery, as well as store pickup of online grocery orders.
Higher online grocery sales helped it expand market share in the category, according to Walmart which will have the store pickup service established in 3,100 stores in January 2020.
The company reiterated that it expected e-commerce losses to increase this year due to ongoing investments. CEO Doug McMillon said on a conference call the company was focused on getting return customer visits and strengthening product assortment.
Grocery sales currently make up 56 percent of total revenue for the retailer.
Amazon.com Inc is trying to crack the food category, especially since it bought organic supermarket chain Whole Foods.
Walmart is partnering with third-party couriers and working with so-called gig, or freelance, drivers, who are cheaper than full-time employees, to push down costs, Reuters recently reported.
The U.S. retailer, which overtook Apple Inc to become the third largest e-commerce retailer last year, is likely to capture a 4.6 percent share of the U.S. e-commerce market, behind eBay Inc and Amazon, according to research firm eMarketer (Reuters).
Walmart repeated its forecast that fiscal year 2020 earnings per share would decline in the low single digits in percentage terms, compared with last year.
Excluding the acquisition of Indian e-commerce firm Flipkart, it sees an increase in the low- to mid-single-digits.
McMillon says the company is very disappointed with India’s revised e-commerce regulations, which ban companies from selling products via firms in which they have an equity interest and bar them from making deals with sellers to sell exclusively on their platforms.
He said the Indian government didn’t consult with Walmart and other U.S. companies before it changed the rules.
“We hope for a collaborative regulatory process going forward, which results in a level playing field,” he argues.
- Total revenue was $514.4 billion, an increase of $14.1 billion, or 2.8% (excluding currency)
- Walmart U.S. comp sales, increased 3.6%
- Walmart U.S. eCommerce sales increased 40%
- Grocery pickup and delivery are available in more than 2,100 and nearly 800 locations, respectively
- The company generated $27.8 billion in operating cash flow and returned $13.5 billion to shareholders through dividends and share repurchases
Walmart about Walmart
- Each week, over 275 million customers and members visit our more than 11,300 stores under 58 banners in 27 countries and eCommerce websites.
- Walmart employs over 2.2 million associates worldwide.
Sources: Reuters, Walmart, The Grocer.