Walmart Earnings: What to Watch
February 16 2018 - 02:48PM
Dow Jones News
By Sarah Nassauer
Walmart Inc. is scheduled to report fourth-quarter financial
results before the market opens Tuesday. Here is what you need to
know:
EARNINGS FORECAST: Analysts are expecting earnings-per-share of
$1.37, according to Thomson Reuters, up from Walmart's year-ago
earnings of $1.22 a share.
REVENUE FORECAST: Analysts forecast $134.9 billion in revenue,
up from $130.9 billion a year ago.
WHAT TO WATCH:
HIGH EXPECTATIONS: Analysts expect sales and traffic to rise due
to higher e-commerce sales and more traffic to stores, adding to
over three years of quarterly sales growth for the country's
largest retailer. Expectations are high amid strengthening wages
for low-income workers, strong holiday sales figures previously
reported by other retailers and Walmart's e-commerce momentum in
recent quarters. But some investors are watching to see where that
growth comes from -- e-commerce or stores -- as a sign of how
Walmart will compete with Amazon.com Inc. Walmart has said
quarterly sales in stores or websites operating for at least a year
would rise between 1.5% to 2%.
TAX OVERHAUL: Walmart has hinted it would give more details on
how the new tax code affects its finances and how it might spend
the expected additional profit. Last month, Walmart said it would
raise starting wages for store workers to $11 an hour, add parental
leave benefits and hand out a one-time bonus to many hourly
workers. The wage and bonus payments would cost around $700 million
up front, the company said. Analysts estimate the additional
parental leave benefits would cost around $100 million. Morgan
Stanley said in a research note this week that Walmart will benefit
from around $2.2 billion in tax savings under the new law, which
leaves 65% of the funds yet unaccounted for. Investors are watching
the retailer's statements on the tax code as an indication of how
other retailers might need to allocate funds to compete, either
lowering product prices, investing in e-commerce acquisitions or
shifting how the store workforce is used.
AMAZON BATTLE: Ecommerce sales at Walmart U.S. have grown
quickly since the acquisition of Jet.com Inc. in Sept. 2016. Jet
founder Marc Lore took over Walmart's e-commerce operations,
quickly adding features like free 2-day shipping on more items,
expanding online selection and buying a string of smaller online
retailers. Walmart also has added hundreds of online grocery pickup
locations at stores, sales that are counted in the e-commerce
figures. U.S. e-commerce sales have grown at least 50% in the past
three quarters, though Walmart has indicated that will slow as the
initial sales boost from acquisitions subsides. Walmart expects
U.S. e-commerce sales to grow 40% in the coming fiscal year.
E-commerce sales still account for around just 4% of the retailer's
nearly half-a-trillion dollars in annual revenue.
PROFITABILITY: Walmart has said that full-year earnings per
share will rise to between $4.38 and $4.46, and rise 5% further in
fiscal year 2019 that started Feb. 1. Analysts have noted that
margins will continue to be under pressure as Walmart invests in
e-commerce, new services like grocery pickup and back-end
technology improvements, while a higher percentage of sales move
online. Walmart has promised to rein in costs and has made a string
of job cuts in stores and corporate offices in recent years. It
closed 10% of U.S. Sam's Club locations earlier this year and has
slowed Walmart store openings to focus spending on e-commerce
growth.
Write to Sarah Nassauer at sarah.nassauer@wsj.com
(END) Dow Jones Newswires
February 16, 2018 14:33 ET (19:33 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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