Walmart shares tumble after it reports 4Q earnings drop
File photo of a Walmart store. (Photo: REUTERS/Rick Wilking)
NEW YORK: Walmart reported higher overall sales in the fourth quarter on Tuesday (Feb 20), but shares tumbled as the US retail giant's earnings were dented by higher costs and as online sales growth slowed.Shares were down 6.5 per cent in pre-market trading to US$97.94 after the chain reported a 42.1 per cent drop in earnings to US$2.2 billion for the quarter ending Jan 31.Earnings translated to US$1.33 a share, four cents shy of analyst expectations, even as revenues rose 4.1 per cent to US$136.3 billion.Walmart has spent aggressively in the last two years to expand its e-commerce offerings and to boost employee pay and beautify stores.Those efforts helped it produce a solid 2.6 per cent gain in comparable sales in US stores, which accounts for more than half of revenues.However, quarterly earnings were hit by a 3.2 per cent increase in costs to US$131.8 billion.
Chief financial officer Brett Biggs said about two-thirds of the drop in profit margin was due to investments to keep prices low and to the effect of sales of lower-margin e-commerce items.The remainder was because of markdowns associated with liquidating goods from 63 Sam's Club stores that were shut down during the quarter and from winding down a Brazilian e-commerce venture.Earnings also were marred by one-time employee severance costs connected to the Sam's closures.The retailer's effort to beef up its e-commerce business to compete with Amazon have included acquisitions of Jet.com, smaller entities like the men's shopping line Bonobos and a joint venture with the Lord & Taylor department store chain.
Walmart US saw e-commerce sales increase 23 per cent, slower than the 50 per cent jump in the third quarter. Most of this slowdown was due to the accounting of the Jet.com acquisition, but also due to unspecified "operational challenges that negatively impacted growth," said Walmart chief executive Doug McMillon.McMillon said the company would accelerate efforts such as "scan and go" and double its online grocery offerings in the US in 2018."We're confident in our strategy to transform the company," McMillon told analysts in a conference call. "It's really about providing more convenience to customers."The world's biggest retailer provided earnings projections for the current fiscal year of between US$4.75 and US$5.00 a share, a relatively low range considering the consensus among analysts is for US$4.97.
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