Retail conglomerate Walmart suffered an earnings setback during the holiday season as higher expenses, mainly those related to promotional activities, ragged margins. Failing to benefit from higher comparable sales, the bottom line came in below market expectations.
Walmart e-commerce sales growth slows; Earnings drop on higher costs
Though Walmart has been aggressively revamping its digital prowess to keep pace with arch-rival Amazon, including the adoption of virtual reality, e-commerce sales grew at a slower pace in the fourth quarter of 2018. Meanwhile, the impact of the negative factors on earnings was eased by a significantly lower income tax provision. The stock lost over 6% following the announcement.
Earlier this month, Amazon reported a higher-than-expected growth in its fourth-quarter earnings, helped by a combination of strong sales growth and an uptick in the cloud business.“We’re making real progress putting our unique assets to work to serve customers in all the ways they want to shop, and I want to thank our associates for their great work this past year. We’re making decisions to position the business for success and investing to win with customers and shareholders,” said Walmart CEO Doug McMillon.
Walmart’s net earnings fell 40% to $0.73 per share in the final three months of 2018. On an adjusted basis, earnings were $1.33 per share. Revenues advanced 4% annually to $136.4 billion. Total US comparable store sales grew at a faster pace of 2.8% than 2% in the fourth quarter of 2017. Same store sales of Walmart US rose 2.7%, continuing the upward trend that began over three years ago. Sam’s Club comparable store sales moved up 3.6%.
Looking forward, the company expects consistent operational performance in the current fiscal year and beyond, with comparable store sales forecast to grow around 40% in 2019. Last year, Walmart had embarked on a restructuring process involving closure and remodeling of several stores in the US and critical changes to the management team.