It's full speed ahead for Walmart

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It's full speed ahead for Walmart

By Gina Acosta - 02/20/2018

Despite hitting a snag in the fourth quarter, Walmart's plan to transform itself into an omnichannel powerhouse has great momentum heading into the rest of 2018.

What snag?

Walmart reported an increase in digital sales of 23% in the fourth quarter ended Jan. 31, well below the 50% e-comm growth it hit in the previous quarter. Walmart blamed the Jet acquisition and operational problems for the decrease.  

But the e-commerce decline sort of overshadowed an impressive quarter for same store sales and store traffic. Walmart U.S. comp sales increased 2.6%, and comp traffic increased 1.6%. On a two-year stack, comp sales growth of 4.4% marked the best performance in eight years. Walmart's e-commerce increase for the full year, 44%, was also impressive.

"The majority of this e-commerce slowdown was expected as we fully lapped the Jet acquisition as well as creating a healthier long-term foundation for holiday," Walmart CEO Doug McMillon said. "A smaller portion of the slowdown was unexpected, as we experienced some operational challenges, namely out-of-stocks, that negatively impacted growth. Overall, we finished the year with e-commerce sales growth of more than 40%. So, we feel better about the year than the quarter." 

The retailer did report a profit decline for the quarter, down to $2.17 billion or 73 cents in diluted earnings per share from $3.75 billion, or $1.22 a share during the same quarter the previous year. On a comparison basis, adjusted EPS increased to $1.33 for the quarter and $4.42 for FY18.

The mixed results reflect Walmart’s battle to transform itself. The retailer is making big investments in both its digital business and stores, which are eating into profits. Walmart said Tuesday that digital sales growth could be around 40% in the new fiscal year.

For the fourth quarter, total revenue, excluding foreign exchange effects, increased by $5.3 billion, or 4.1%, to $136.3 billion. The biggest driver of the top line increase was Walmart U.S., which saw sales increase 3.4% to $86.6 billion. 

Sam's Club comp sales, excluding fuel, increased 2.4% led by comp traffic growth of 4.3%.
Net sales at Walmart International were $33.1 billion, an increase of 6.7%. 

For the year, total revenue was $500.9 billion, an increase of $15.1 billion, or 3.1%, excluding currency. E-commerce sales increased 44%. For the full year, profits plunged 27.7% to $9.86 billion or $3.28 per share. That was down from $13.6 billion, or $4.38 in diluted earnings per share.

The company recorded a provisional benefit of $207 million for both the fourth quarter and full year as a result of the 2017 Tax Cuts and Jobs Act.

For the current year, the company expects U.S. comparable Walmart store sales to rise 2% and net sales growth of 1.5% to 2%.  

"We’re confident in our strategy to transform the company. We’re accelerating innovation in the business to make shopping faster and easier for our customers. Creativity, decisiveness and speed are priorities. We made good progress this past year to save busy families time and money and we will do more. By becoming stronger at mobile and leveraging digital capabilities, we improved in-store experiences, including our pharmacy and money services areas. We enabled easy reorder online. We’re making the checkout experience easier with Scan & Go and also digitizing the returns process. We made acquisitions to improve our online assortment and we're partnering with others, like Google and JD.com, in new ways. We're expanding online grocery in the U.S. and around the world and broadening our delivery capabilities in the U.S., China and other international markets," McMillon said.