Walmart's 4th-Quarter Earnings, Revenue Fail to Beat Expectations

E-commerce sales grow 35% Continue reading... Read More...

Walmart Inc. (NYSE:WMT) released its fourth-quarter results before the market opened on Feb. 18.

The retail giant posted disappointing earnings and revenue. It noted several factors were responsible for weak results, including a short holiday season, low demand for key consumer staples and political unrest in Chile. In addition, the company experienced poor sales of toys, apparel and video games during the holiday season.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Snapshot of the quarter ” data-reactid=”19″>Snapshot of the quarter

Walmart reported adjusted earnings of $1.38 per share. Analysts had predicted earnings of $1.43 per share. Revenue grew 2.1% to $141.67 billion, which fell short of expectations of $142.49 billion.

Same-store sales grew 1.9% on the back of strong grocery sales. This was, however, lower than the 2.3% growth analysts were anticipating. The number of transactions grew 1% and the average ticket rose 0.9%, which was down from a 2.6% increase in the year-ago quarter.

Reflecting on the quarter, Chief Financial Officer Brett Biggs said:

“The fourth quarter started and ended strong with solid sales growth through Cyber Monday and in January. In the few weeks before Christmas, we experienced some softness in a few general merchandise categories in our U.S. stores. However, Walmart U.S. grocery sales and e-commerce sales were strong throughout the quarter.”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Online sales performance” data-reactid=”26″>Online sales performance

E-commerce sales grew 35% in the U.S., fueled by strong online sales as well as robust grocery sales. The company, however, connot rely on grocery alone to deliver online growth. Other products must fare well to ensure that the e-commece business is profitable. Despite the revenue growth, the e-commerce space remains unprofitable owing to high transportation costs and other expenses that have pressured margins.

The company is looking to take up a hybrid approach to retail in an effort to combat Amazon (NASDAQ:AMZN). However, Walmart’s brick-and-mortar stores happens to be its major source of revenue.

Walmart projects its losses from its e-commerce business will be flat to lower in 2020 as compared with 2019.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Store detail” data-reactid=”30″>Store detail

The retailer had more than 3,200 stores that provide pick-up services for online grocery orders at the end of 2019. During the quarter, the company opened one Supercenter and modernized 80 of its existing stores.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Outlook ” data-reactid=”32″>Outlook

For fiscal 2021, Walmart projects earnings will range from $5 to $5.15 per share. Net sales are expected to jump 3%, while U.S. comps are forecasted to grow by at least 2.5% and U.S. e-commerce sales are anticipated to gain appoximately 30%

Disclosure: I do not hold any positions in the stocks mentioned.