Surging Walmart sidesteps the holiday sales letdown
New York - Walmart defied a gloomy government retail sales report for December, delivering fiscal fourth-quarter profits and sales that beat Wall Street expectations.
The world's largest retailer also enjoyed another quarter of surging e-commerce sales during the critical holiday period as it expanded its online assortment and services. Walmart shares moved higher on Tuesday, closing up 2.2 percent, or $2.21, to $102.20.
Walmart's solid earnings encouraged investors to bid up other retailers and consumer goods companies and helped Wall Street end the day in positive territory. Amazon gained 1.2 percent, while Target added 1.5 percent.
The latest earnings report provides more evidence that Walmart's efforts to expand online grocery services, including curbside pickup and home delivery, are widening the gap between itself and traditional rivals while at the same time holding its own against online leader Amazon.
The strong performance from the world's largest retailer is especially encouraging after a very weak December retail sales report last week from the U.S. Commerce Department led many to fear that consumers had gone into hiding. Some analysts even questioned the reliability of the government report.
The data, delayed by a government shutdown, hinted that a volatile stock market, a government impasse and a trade war with China had taken their toll on the American psyche. At least in Walmart's case, that appears to be untrue.
Walmart executives said Tuesday that its customers are benefiting from a stronger economy. The company also said its sales got a lift from the government issuing February checks to Supplementary Nutrition Assistance Program recipients early in the wake of the government impasse.
"The consumer still feels pretty good," Brett Biggs, Walmart's chief financial officer told analysts on an earnings call Tuesday, ticking off economic tail winds like lower gas prices and rising wages. "A number of things are still working. We are watching, making sure that we are in the right place with the customer. No matter the environment, we are able to react."
Growing list of retail casualties
Walmart and other retailers are also benefiting from the woes of others. Toys R Us and Bon-Ton Stores have gone out of business, and the list of casualties keeps getting longer. This week, Payless ShoeSource began liquidation sales at roughly 2,500 stores in North America. Sears is shrinking, and J.C. Penney is floundering.
A diverse roster of retailers including Macy's, Target and Home Depot are slated to report fiscal fourth-quarter results in the next few weeks. Target had reported strong holiday sales in January, while several other department stores, including Macy's, offered disappointing results.
Walmart posted strong sales across a wide range of products from toys to groceries and electronics. That helped sales at stores open at least a year to rise 4.2 percent at its U.S. namesake stores, following a 3.4 percent pace in the fiscal third quarter. The figure excludes sales from fuel.
Since buying Jet.com more than two years ago, Walmart has been expanding online by acquiring brands and adding thousands of items. Walmart now offers grocery delivery service at 800 stores and grocery pickup at 2,100 stores. Walmart has revamped its website with a focus on fashion and home furnishings. That all helped drive a 43 percent increase in e-commerce sales in the quarter, matching the pace from the previous period.
Walmart's online U.S. sales are still a fraction of Amazon's online global merchandise empire, which reached $122.98 billion last year. Walmart's U.S. online sales for the first nine months of its latest fiscal year totaled $10.2 billion. The discounter hasn't yet disclosed the year-end figures. But it has rapidly expanded its services online.
"Serious contender"
"Pleasingly, Walmart is successfully broadening its online base of customers and is now attracting both younger and more affluent demographics," wrote Neil Saunders, managing director of research firm GlobalData Retail, in a published report. "These are early days, but Walmart is now a serious contender in the online space and presents a much more serious threat to Amazon than it did 18 months ago."
Walmart had a fourth-quarter profit of $3.69 billion, or $1.27 per share. Earnings, removing one-time items, were $1.41 per share, which is 8 cents better than analysts had expected, according to a survey by Zacks Investment Research.
The Bentonville, Arkansas, company had revenue of $138.79 billion, also better than expected.
The company's Sam's Club division had a 3.3 percent increase in revenue at stores opened at least a year during the fiscal fourth quarter.
Outside the U.S., Walmart is reshaping its international business, scaling back in Brazil, while pushing hard into markets with big growth opportunities like China and India. Last year, Walmart bought a $16 billion controlling stake in Indian online retailer Flipkart. Walmart CEO Doug McMillon told analysts Tuesday he was disappointed in the more stringent rules by the Indian government to curb how foreign e-commerce companies operate, but it "hasn't shaken our confidence."
