Sponsored By

Walmart turns in lower-than-expected earnings for Q4, full year

CEO Doug McMillon cites softness in holiday results amid U.S. sales gains

Russell Redman

February 18, 2020

6 Min Read
Walmart checkout lanes
Walmart executives said food and grocery were a sales driver for the retail giant during the quarter and fiscal year, with grocery pickup and delivery helping to fuel gains.Walmart

Walmart fell short of Wall Street’s earnings forecast for its 2020 fourth quarter and fiscal year despite sales upticks in both periods, including robust e-commerce growth.

Food, grocery and health-and-wellness sales were bright spots in the quarter at Walmart U.S. and Sam’s Club, fueled in part by grocery pickup and delivery, executives said. Meanwhile, the holiday sales period saw a strong opening and finish in spite of a lull leading up to Christmas, they noted.

For the 14-week fourth quarter ended Jan. 31, Walmart totaled revenue of $141.67 billion, up 2.1% from $138.79 billion a year earlier. In constant currency, there was no significant change, the Bentonville, Ark.-based retailer reported. Total U.S. same-store sales rose 2% (1.8% excluding fuel) year over year.

Full-year 2020 revenue, covering 53 weeks, edged up 1.9% to $523.96 billion from $514.41 billion in fiscal 2019, Walmart said. Revenue in constant currency was $528.1 billion, reflecting a gain of 2.7%. U.S. comparable-store sales in fiscal 2020 grew 2.6% (2.5% excluding fuel).

Doug McMillon-Walmart CEO-onstage.jpg

Walmart Earnings Miss

At the bottom line, Walmart posted consolidated net income of $4.14 billion in the fourth quarter, or $1.45 per diluted share, compared with $3.69 billion, or $1.27 per diluted share, a year ago. Adjusted net earnings per share were $1.38 versus $1.41 in the fiscal 2019 quarter.

Related:New COOs to take reins at Walmart U.S., Sam’s Club

Analysts, on average, projected fourth-quarter adjusted EPS of $1.43, with estimates ranging from a low of $1.34 to a high of $1.49, according to Refinitiv/Thomson Reuters.

Walmart said adjusted EPS in the quarter excludes an unrealized gain of 26 cents on its equity investment in JD.com, a charge of 15 cents from business restructurings, a tax benefit of 11 cents from income tax reduction in India and a charge of 15 cents from other income-tax matters.

Consolidated net earnings for fiscal 2020 came in at $14.88 billion, or $5.19 per diluted share, versus $6.67 billion, or $2.26 per diluted share in 2019. On an adjusted basis, Walmart reported full-year EPS of $4.93 compared with $4.91 a year earlier. The prior-year result excludes a net impact of $2.65 per diluted share from the loss of a majority stake in Walmart Brazil, unrealized gains/losses from the JD.com investments and a tax reform adjustment, Walmart said.

Wall Street’s consensus full-year forecast was for adjusted EPS of $4.99, with projections running from a low of $4.90 to a high of $5.05.

“In Q4, we saw strong performance in the U.S., with e-commerce and Sam’s Club plus strength in Mexico, India and China. We started and finished the quarter with momentum, while sales leading up to Christmas in our U.S. stores were a little softer than expected,” Walmart President and CEO Doug McMillon said in a statement. “The new year has started off well, and we look forward to another strong year. We remain focused on providing our customers with the best omnichannel experience from any retailer.”

Related:Walmart to phase out Jetblack online shopping service

Walmart U.S., Sam’s Club Gains Include Mixed Holiday Results

At Walmart U.S., fourth-quarter net sales advanced 1.9% to $92.27 billion from $90.52 billion a year earlier. Same-store sales were up 2% (1.9% without fuel). Walmart said the number of transactions rose 1%, while ticket size grew 0.9%. E-commerce sales surged 35% year over year at the top line and gained 2.1% on a comparable basis. Operating income fell 12.7% to $4.4 billion, reflecting $450 million in business restructuring charges.

Overall net sales at Walmart U.S. in fiscal 2020 were $341 billion, up 2.8% from $331.67 billion in 2019. Comp-store sales rose 2.8%, with no significant impact from fuel price changes. Full-year e-commerce sales climbed 30%. Operating income was flat at $17.38 billion.

On a two-year stacked basis, Walmart U.S. comp sales were up 6% in the fourth quarter, showing continued strength in food and consumables, Walmart noted. Similarly, Walmart U.S. eCommerce exhibited strong growth in grocery pickup and delivery, while Walmart.com turned in its highest quarterly growth rate of the year in the final quarter of fiscal 2020. As of the fiscal year-end, Walmart U.S. had nearly 3,200 grocery pickup sites and more than 1,600 delivery locations.

Also turning in gains was Sam’s Club. Fourth-quarter sales rose 2.6% to $15.29 billion from $14.91 billion a year ago. Comparable-club sales advanced 2.2% year over year, but the increase was 0.8% excluding fuel. Transaction count was up 4.3%, but ticket size decreased 3.5%. E-commerce sales jumped 33% at the top line and 2% on a comparable basis. Walmart noted that lower tobacco sales negatively affected comp results by about 300 basis points. Operating income declined 7.2% to $384 million.

The warehouse club chain closed out fiscal 2020 with net sales of $58.79 billion, up 1.6% from $57.84 billion in 2019. Comp sales gained 1.5% year over year (0.7% excluding fuel). The company didn’t disclose e-commerce sales growth for the year. Operating income climbed 8% to $1.64 billion.

“The fourth quarter started and ended strong, with solid sales growth through Cyber Monday and in January,” Chief Financial Officer Brett Biggs commented on overall U.S. results. “In the few weeks before Christmas, we experienced some softness in a few general-merchandise categories in our U.S. stores. However, Walmart U.S. grocery sales and e-commerce sales were strong throughout the quarter. Sam’s Club performed well, including solid results in e-commerce.”

Though holiday sales fell short of Walmart’s expectations, the company has identified the key issues that impacted results, according to Biggs.

“The holiday season delivered positive transaction growth and underlying expense leverage was strong for the quarter. However, it wasn’t as good as expected due to lower sales volumes and some pressure related to associate scheduling,” he explained. “We understand the factors that affected our results and are developing plans to address them. We remain confident in our business strategy and our ability to deliver value and convenience for our customers through an integrated omnichannel offering across the globe.”

Walmart Grocery Pickup signage

Walmart U.S. eCommerce sales climbed 35% in the fourth quarter and 30% for all of fiscal 2020.

Operating Income Impacted at Walmart International

Walmart International saw a 2.3% rise in net sales to $33.05 billion in the fourth quarter. In constant currency, net sales were up 2.2% to $33.04 billion. Operating income fell 5.6% to $1.11 billion and was down 7.7% to $1.08 billion in constant currency.

Fiscal 2020 international net sales dipped 0.6% to $120.13 billon but, in constant currency, were up 2.8% to $124.27 billion, Walmart said. Operating income dropped 31% to $3.37 billion, with the decrease  slightly less at 28.5% to $3.49 billion in in constant currency. The company noted that disruption in Chile negatively impacted Walmart International operating income by about $110 million.

“We experienced softness in some key international markets, as well as in Chile, where unrest led to disruption in the majority of our stores,” Biggs stated. “Walmex, China and Flipkart all had a solid quarter.”

Looking ahead, Walmart projects fiscal 2021 net sales growth of about 3% (constant currency), with same-store sales gains of at least 2.5% (excluding fuel) at Walmart U.S. and about 3% (excluding fuel and tobacco) at Sam’s Club. The company forecasts 30% sales growth for Walmart U.S. eCommerce. Net sales growth for Walmart International is pegged at around 4%.

Walmart expects adjusted earnings per share of $5.00 to $5.15 for fiscal 2021. Analysts’ average estimate is for adjusted EPS of $5.22, with projections ranging from a low of $5.10 to a high of $5.34, according to Refinitiv/Thomson Reuters.

Walmart ended fiscal 2020 with 11,503 stores overall. As of Jan. 31, that number included 4,756 Walmart U.S., 599 Sam’s Club and 6,148 international locations.

About the Author

Russell Redman

Senior Editor
Supermarket News

Russell Redman has served as senior editor at Supermarket News since April 2018, his second tour with the publication. In his current role, he handles daily news coverage for the SN website and contributes news and features for the print magazine, as well as participates in special projects, podcasts and webinars and attends industry events. Russ joined SN from Racher Press Inc.’s Chain Drug Review and Mass Market Retailers magazines, where he served as desk/online editor for more than nine years, covering the food/drug/mass retail sector. 

Russell Redman’s more than 30 years of experience in journalism span a range of editorial manager, editor, reporter/writer and digital roles at a variety of publications and websites covering a breadth of industries, including retailing, pharmacy/health care, IT, digital home, financial technology, financial services, real estate/commercial property, pro audio/video and film. He started his career in 1989 as a local news reporter and editor, covering community news and politics in Long Island, N.Y. His background also includes an earlier stint at Supermarket News as center store editor and then financial editor in the mid-1990s. Russ holds a B.A. in journalism (minor in political science) from Hofstra University, where he also earned a certificate in digital/social media marketing in November 2016.

Russell Redman’s experience:

Supermarket News - Informa
Senior Editor 
April 2018 - present

Chain Drug Review/Mass Market Retailers - Racher Press
Desk/Online Editor 
Sept. 2008 - March 2018

CRN magazine - CMP Media
Managing Editor
May 2000 - June 2007

Bank Systems & Technology - Miller Freeman
Executive Editor/Managing Editor
Dec. 1996 - May 2000

Supermarket News - Fairchild Publications
Financial Editor/Associate Editor
April 1995 - Dec. 1996 

Shopping Centers Today Magazine - ICSC 
Desk Editor/Assistant Editor
Dec. 1992 - April 1995

Testa Communications
Assistant Editor/Contributing Editor (Music & Sound Retailer, Post, Producer, Sound & Communications and DJ Times magazines)
Jan. 1991 - Dec. 1992 

American Banker/Bond Buyer
Copy Editor
Oct. 1990 - Jan. 1991 

This Week newspaper - Chanry Communications
Reporter/Editor
May 1989 - July 1990

Stay up-to-date on the latest food retail news and trends
Subscribe to free eNewsletters from Supermarket News

You May Also Like