Walmart Earnings are Weak in Q4
Walmart reported slow holiday sales even with their sustained online increases in share space and earnings which is adding to the disappointing earnings season for the usual suspects in the retail space.
Walmart reported that their U.S. comparable sales increased only 1.9% in what should be their biggest quarter when contrasted to Q4 2018 that showed a 4.2% growth rate. Even though the war has really begun between juggernauts Amazon and Walmart for customers, in-store shopping was down during Q4 2019, however Walmart showed U.S. e-commerce sales up 35% in the 4th quarter, as they were boosted by online grocery orders.
Walmart executives have come out to say that even though sales were strong around Thanksgiving it started to sag early into the December month as sales were lackluster for toys, video games, and apparel. The government said the sales were strong overall in 2019, but brick and mortar companies are having a harder time as consumer tastes for shopping have shifted to be solely online.
“We feel pretty good about the year even though the fourth quarter was not our best,” CEO Doug McMillon stated during an investor call. He blamed merchandising missteps for the late November sales slowdown.
"There was a lack of high-price, in-demand holiday toys", Mr. McMillon said, as well as that, "Walmart stocked too many inexpensive clothes and too much seasonal attire". “We looked like red and green and could have been more basic and could have had some middle price points,” he said. He believes that early reports have January and February sales far stronger.
Walmart executives took the time to show investors their plans to boost profits online and take Amazon head on. They want to additionally create new revenue sources from some of their new ventures in digital advertising and grow out a larger health care business while getting rid of nonperforming assets.
Health care, which will include the addition of new store clinics with an array of new medical services, serves as an added “opportunity that takes advantage of big boxes and big parking lots close to people,” Mr. McMillon told investors. “We think we can learn how to drive alternative revenue and profit streams by building on our core businesses,” he said.
Walmart announced that revenues increased 2% to $141.67 billion, showing increases in its international markets and Sam’s Club warehouse chain. Net income was up 12% to $4.14 billion which was comprised of numerous one-time tax matters. The stock was up 30% for 2019. The 4th quarter was not as bad for Walmart but could be a showing a slowing of the economy. Walmart reported adjusted EPS of $1.38, beneath the consensus estimate of $1.44. Guidance for 2021, Walmart's adjusted earnings are $5 to $5.15 a share below The Street's expectations of $5.22.