WMT Walmart Inc

By Sarah Nassauer 

Walmart Inc. reported sluggish holidays sales despite continued online gains, adding to a string of disappointments from traditional retailers as they adjust to changing shopping habits.

Walmart said U.S. comparable sales, those from stores and digital channels operating for at least 12 months, increased 1.9% in the fourth quarter, less than the nearly 3% growth the company predicted.

The results showed the world's biggest retailer struggled to get shoppers to spend in its stores during a shorter holiday selling season as it ramped up efforts to compete with Amazon.com Inc. Walmart's U.S. e-commerce sales rose 35% in the fourth quarter, boosted by online grocery orders.

Executives said the holiday season started strong around Thanksgiving but blamed soft sales of general merchandise in the weeks before Christmas. Executives cited weak sales of toys, videogames and apparel. They will host an investor day later Tuesday where analysts expect to hear more about the company's strategy.

Walmart forecast another year of strong sales growth, predicting U.S. comparable sales will increase at least 2.5% in fiscal 2021 -- after rising 2.8% in the year just ended. It expects U.S. e-commerce growth for the year of 30%, less than the 37% booked in 2020.

"We started and finished the quarter with momentum, while sales leading up to Christmas in our U.S. stores were a little softer than expected," said Chief Executive Doug McMillon in a press release. "The new year has started off well."

Operating income fell 12.3% for the fourth quarter, to $5.3 billion, as the company continues to invest in its online operations. Walmart has pinched spending elsewhere, adding more automation to stores and laying off workers at some of its unprofitable e-commerce brands.

During the quarter Walmart continued to work to cut expenses but the savings didn't have as much impact as expected "due to lower sales volumes and some pressure related to associate scheduling," Chief Financial Officer Brett Biggs said in the release.

Overall, Walmart reported revenue rose 2% to $141.67 billion for the three months ended Jan. 31, including gains in its international markets and its Sam's Club warehouse chain. Net income was $4.14 billion, up 12% from a year ago, including several one-time tax items.

Walmart has fared better than most U.S. retailers in recent years, as the retail giant ramps up online grocery orders and takes market share from smaller chains like Sears that are closing stores.

The holiday season has been a disappointment to most traditional retailers. Target Corp. fell short of its own expectations, citing weak sales in toys and electronics. Macy's Inc. recently said it would close another 125 of its department stores.

Due to a late Thanksgiving, there were six fewer days in the 2019 holiday-shopping season compared with 2018, which may have eaten into sales, said retail analysts.

Walmart shares, which are trading near all-time highs, were little changed in early Tuesday trading. The stock closed Friday at $117.89, down slightly so far this year after rallying roughly 30% last year.

In recent weeks retail analysts have been lowering their expectations for Walmart's sales and profits, after publishing largely optimistic reports last year. Although the quarterly sales growth and profits missed earlier forecasts, the results weren't as weak as some had feared.

For the fourth quarter, Walmart reported adjusted earnings per share of $1.38, below the consensus estimate of $1.44. For fiscal 2021, the company predicted adjusted earnings of $5 to $5.15 a share, a slight increase from 2020, but below Wall Street's expectations of $5.22.

Walmart, which operates hundreds of stores in China, said it continues to monitor the coronavirus outbreak but hasn't included any potential financial effects in its guidance for the current fiscal year. Apple Inc. warned Monday it would miss its March quarter financial targets due to the outbreak.

Write to Sarah Nassauer at sarah.nassauer@wsj.com

(END) Dow Jones Newswires

February 18, 2020 08:02 ET (13:02 GMT)

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