Walmart Inc. today reported higher sales for fourth quarter and fiscal year, but lower than expected revenues in its eCommerce division caused its stock to take a tumble.
Total revenue for the quarter ended January 26, was $136.3 billion, an increase of $5.3 billion, or 4.1%. Excluding currency, total revenue was $135.1 billion, an increase of $4.1 billion, or 3.1%.
Same-store sales increased 2.6% during the period, while comp traffic increased 1.6%. Company officials reported that on a two-year stack, comp sales growth of 4.4% marked the best performance in eight years. Comps at its Sam’s Club membership club division increased 2.4%, while nine of 11 international divisions posted positive comp sales.
For the year, total revenue was $500.3 billion, an increase of $14.5 billion, or 3.0%. Excluding currency, total revenue was $500.9 billion, an increase of $15.1 billion or 3.1%.
However, U.S. eCommerce sales growth in the fourth quarter was 23%, down from 50% in the third quarter, causing Walmart’s stock to plummet throughout the day.
“The majority of this slowdown was expected as we fully lapped the Jet acquisition as well as creating a healthier long-term foundation for holiday,” C. Douglas McMillon, president, CEO and director of Bentonville, Ark.-based Walmart Inc., said during an earnings call. “A smaller portion of the slowdown was unexpected, as we experienced some operational challenges that negatively impacted growth. Overall, we finished the year with eCommerce sales growth of more than 40%, so we feel better about the year than the quarter.”
“The stock reaction has been negative and severe,” Ben Bienvenu, a securities analyst at Stephens Inc., in Little Rock, Ark., told Supermarket News. “There was the slower eCommerce growth in the U.S., and margins will be under pressure next year. While the stock is down today, it has had tremendous performance over the past year, and I think the outlook for eCommerce growth continues to be robust, and tax reform has added some incremental investments in the business that might not otherwise be there.”
Same-store sales growth in the single digits is consistent with what Walmart has been reporting for the past year and a half, Bienvenu said. “I see continued momentum in the grocery portion of Walmart’s business,” he said, adding that as previously stated in October, Walmart is slowing down its new store development. “Same-store sales at Walmart Neighborhood Markets continue to outperform, but I think they feel they are better suited to shift their investment spin towards eCommerce versus bricks-and-mortar stores.”
For fiscal 2019, Walmart expects eCommerce growth to be about 40% for the year.
“We’re confident in our strategy to transform the company and we continue to be guided by our four key objectives: make every day easier for busy families, change how we work, deliver results and operate with discipline, and be the most trusted retailer,” McMillon said.
Walmart is targeting customers who shop across all channels, he added.
“U.S. customers that shop us in-store and online spend nearly twice as much as customers that only shop with us in-stores,” McMillon said. “Their loyalty to Walmart strengthens overall. Online grocery customers are a great example as they spend more with us in total once they start using the service. So we’ll lean in this year by nearly doubling the number of online grocery locations in the U.S.”
Walmart.com, including Online Grocery, is and has been the key driver of the company’s eCommerce growth, and that will continue, McMillon said. “The Jet brand over indexed with higher income, urban millennial customers when we made the acquisition, and we intend to build on that strength going forward,” he said.
“This is probably the best buying opportunity for Walmart stock in years,” said Burt P. Flickinger III, managing director at Strategic Resource Group in New York. “Today is simply a reset, and the sell-side analysts are way overreacting like the sky is falling. The institutions are selling, when in reality there has never been a better opportunity to buy Walmart stock in 20 years, since you have the best leadership team since founder Sam Walton himself.”
Walmart stock closed the day at $94.11 a share, down $10.67 or 10.18%.