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)

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