By Sarah Nassauer
Walmart Inc.'s profit and sales rose over the winter holidays, a
sign that the retail giant lured shoppers from rivals and that
Americans continued to spend freely amid mixed economic
signals.
In the U.S., the company's comparable sales, which exclude gas
but include digital sales, rose 4.2% in the January-ended quarter,
adding to a string of positive quarterly sales. Walmart got a boost
from strong grocery sales, online orders, as well as holiday
purchases including toys.
Walmart had expected quarterly U.S. comparable sales to rise at
least 3% from a year earlier. In the latest quarter, the company
got a lift from the U.S. government sending February checks to
Supplemental Nutrition Assistance Program recipients in January to
ensure payment amid the federal government shutdown. The company
said the shift added 0.4% to its comp sales growth.
The results -- following mixed economic data and sales updates
from other U.S. chains -- were mostly better than Wall Street had
expected and the company reiterated its financial forecasts for
fiscal 2020. Shares of Walmart gained about 3% to $103.43 in
Tuesday morning trading.
"We experienced a favorable economic environment in the U.S. for
much of the year," which helped lift grocery spending, said Walmart
CEO Doug McMillon on a conference call.
More than half of Walmart's U.S. revenue comes from food and
other staples. The retailer has fared better than department stores
or mall-based chains that are more heavily reliant on apparel. It
has also benefited by the unraveling of some big-box chains like
Toys 'R' Us Inc. and Sears Holdings Corp.
Walmart said e-commerce sales rose 43% in the latest quarter and
40% for the full fiscal year, hitting the company's expectations
for a small but key part of its business. The growth has been
driven by the expansion of online grocery pickup services to more
than 2,100 of Walmart's 4,600 U.S. stores this fiscal year. Walmart
also started offering online grocery delivery in about 800
stores.
When customers buy online, then pick up in store parking lots,
those sales get counted as online sales. Walmart has previously
said U.S. e-commerce growth will slow to 35% this fiscal year.
Overall, Walmart reported a quarterly profit of $3.69 billion,
or $1.27 per share, compared with $2.18 billion a year earlier.
Excluding a tax-related charge and other items, Walmart said it had
an adjusted profit of $1.41 a share. On that basis, Wall Street was
expecting earnings of $1.33 a share.
Total revenue, including the Sam's Club chain and Walmart's
overseas business, was $138.8 billion, up 1.9% from a year ago.
Excluding currency swings, Walmart said total revenue rose 3.1% to
$140.5 billion.
While Walmart reported an increase in visits to its U.S. stores
in the January-ended quarter, it posted a much higher jump in the
average amount spent. As more grocery sales come through online
orders, shoppers tend to spend more per trip, said Walmart's
finance chief Brett Biggs in an interview. Inflation also rose
"modestly," he said.
At the same time, Walmart's profit margin declined, a result of
a higher percentage of its sales coming from lower margin
e-commerce orders, rising transportation costs and online
investments. Walmart expects e-commerce losses to increase for the
current fiscal year, said Mr. Biggs.
Walmart is the first major U.S. retailer to report full fourth
quarter results. In January, some chains including Target Corp. and
Costco Wholesale Corp. said they had the strongest holiday sales in
years, but others including Macy's Inc. and Kohl's Corp. reported
sluggish growth.
Meanwhile, Amazon.com Inc. reported a record quarterly profit
and said revenue rose 20% to $72.38 billion, the smallest quarterly
jump since 2015.
Generally, U.S. retailers were buoyed last year by a strong U.S.
economy, high employment and rising wages. However, government data
released last week showed December sales at stores, restaurants and
online fell a seasonally adjusted 1.2% from November, the biggest
monthly drop since September 2009.
Outside the U.S., Walmart has been shifting its focus, selling
its retail stores in Brazil and agreeing to merge its U.K. stores
with a rival. The company also struck a deal to spend $16 billion
to acquire Indian e-commerce company Flipkart, a move that it has
warned will weigh on its profits. In the fourth quarter, the
retailer reported strong comparable sales gains in Mexico and a
decline in China.
Since Walmart agreed to buy Flipkart last year, the startup's
CEO Binny Bansal has stepped down and the Indian government has
changed regulations surrounding how foreign e-commerce firms are
allowed to operate. Amazon warned last month those changes could
hurt growth in the country.
"The things that have happened have been disappointing in some
way, but they haven't shaken our confidence and excitement about
what this is going to mean to the company long term," in India, Mr.
McMillon said Tuesday. "We hope to have an effective productive
dialogue, as it relates to future changes that happen. But in terms
of how the business has behaved, it's in line with what we thought
it would be."
Write to Sarah Nassauer at sarah.nassauer@wsj.com
(END) Dow Jones Newswires
February 19, 2019 10:36 ET (15:36 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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