Walmart earnings miss as holiday season disappoints, outlook falls short of estimates

Walmart reported fiscal fourth-quarter earnings fell short of analysts' estimates, as the retailer saw weak demand for toys, apparel and video games during the holiday season.

Its outlook for the upcoming year also came up short of expectations, as Walmart anticipates e-commerce growth will slow. Walmart said the forecast doesn’t include any impact from the deadly coronavirus outbreak, though it continues to monitor the situation.

Political unrest in Chile, where protests have caused disruption in Walmart stores in the region, also weighed on its results in the latest quarter.

Walmart shares fell less than 1% in premarket trading Tuesday on the news.

Here’s what the company reported compared with what analysts were expecting for Walmart’s fiscal fourth quarter, based on Refinitiv data:

Earnings per share: $1.38, adjusted, vs. $1.43 expected

Revenue: $141.67 billion vs. $142.49 billion expected

Same-store sales: up 1.9% in the U.S. vs. growth of 2.3% expected

Walmart’s dismal holiday results add to a list of retailers that saw more of the same. Target also called out weakness in toys. Kohl’s said its women’s apparel business underwhelmed. Amazon, however, last month reported holiday-quarter earnings that smashed analysts' expectations, claiming customers shopped at record levels and that it quadrupled both one-day and same-day deliveries over the period.

Walmart said there was a lack of newness in gaming, and it didn’t have the right assortment in apparel. The entire apparel industry has struggled from a warmer winter.

“The holiday season … wasn’t as good as expected due to lower sales volumes and some pressure related to associate scheduling,” Walmart CFO Brett Biggs said. He said the company had plans in place to address the scheduling issues, but didn’t provide other details.

Walmart reported net income for the quarter ended Jan. 31 of $4.14 billion, or $1.45 cents a share, compared with $3.69 billion, or $1.27, a year ago. Excluding one-time items, Walmart earned $1.38 a share, short of expectations for $1.43 per share, according to a poll by Refinitiv.

It said disruption in Chile lowered its operating income by roughly $110 million.

Looking to the full year, Walmart said earnings are expected to fall within a range of $5.00 to $5.15 a share. Analysts had been calling for annual earnings of $5.22 per share.

Revenue grew about 2.1% to $141.67 billion from $138.79 billion a year ago. But that was short of estimates for $142.49 billion.

Sales at Walmart stores in the U.S. open for at least 12 months, and its website, were up 1.9%, short of expectations for 2.3%.

Transactions at Walmart stores in the U.S. were up 1% during the quarter, down from growth of 1.5% a year ago. The average ticket was up just 0.9%, Walmart said, compared with ticket growth of 2.6% a year ago.

E-commerce sales during the quarter were up 35%, fueled by its best growth yet for and strength in grocery. For the year, Walmart reported online sales growth of 37%, topping its own internal growth targets of 35%.

For fiscal 2021, Walmart expects that growth to slow, with an expectation e-commerce sales will rise roughly 30%.

Though Walmart’s grocery business has been fueling digital sales, the e-commerce business is still unprofitable. Transportation costs and other expenses are pressuring margins. Walmart also has to figure out how to sell other products, beyond grocery, on the internet.

Walmart is expecting losses from its e-commerce operations will be flat to lower this year compared with fiscal 2020, as its global net e-commerce sales approach $50 billion.

Last week, Walmart said it would be discontinuing its text-to-order e-commerce service, known as Jetblack. It launched the business in New York back in 2018. But it hasn’t been able to make money on the project, nor grow the audience at scale, according to reporting by The Wall Street Journal. Instead, Walmart said it plans to incorporate some of Jetblack’s technology into its own business.

It sold ModCloth, a clothing start-up it had previously acquired in a bid to grow the reach of its audience, last year. Another one of its acquisitions, Bonobos, laid off employees last year. And Bonobos founder Andy Dunn late last year announced his departure from Walmart. Dunn had been tasked with helping the head of Walmart’s U.S. e-commerce business, Marc Lore, acquire digital brands.

There has also been ample shake-up among Walmart’s executive ranks of late.

Last month, it said its chief merchant Steve Bratspies would be departing. That news came after the chief merchant for Walmart’s U.S. e-commerce business, Ashley Buchanan, left in December to become CEO of crafts retailer Michael’s. And last summer, Walmart integrated many positions into its own business, eliminating the president role.

Walmart shares are up about 19% over the past 12 months. It has a market value of roughly $332.7 billion.

Read the full press release here.