Walmart's improvements drive spike in online, in-store sales

By EarningsFOXBusiness

Walmart 4Q earnings reinforces it's winning, Amazon is going sideways, retail analyst says

Strategic Resource Group Managing Director Burt Flickinger breaks down Walmart's fourth-quarter results and outlook.

Walmart's fourth quarter earnings topped Wall Street estimates amid concerns that a slew of investments from the world’s largest retailer to both its online platform and brick-and-mortar locations is weighing on margins.

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The Bentonville, Arkansas-based company is adding new in-store technology in an effort to ease customer experience and bolstering its e-commerce capabilities. The improvements – along with its $17 billion acquisition of India’s e-commerce giant Flipkart – comes as Walmart amps up the fight against Amazon for dominance in the global retail sector. And they appear to be paying off.

E-commerce sales at Walmart rose 43 percent in the fourth quarter, the company said on Tuesday, while same-store sales grew 4.2 percent – well above analyst expectations.

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"Progress on initiatives to accelerate growth, along with a favorable economic environment, helped us deliver strong comp sales and gain market share,” CEO Doug McMillon said in a statement.

The company reiterated the fiscal year 2020 guidance provided in October. It continues to believe sales will rise 3 percent in the year, with same-store sales rising as much as 3 percent and online sales growing 35 percent.

TickerSecurityLastChange%Chg
WMTWALMART INC.102.67+0.81+0.80%

While Walmart's investments are paying off in the short-term, concerns remain that they will continue to weigh on margins.

"Walmart has made significant enhancements to its retail operations and e-commerce capabilities...which have translated to significant improvements in sales growth and market share," RBC Capital Markets analyst Scot Ciccarelli wrote in a recent note. "We are bullish on Walmart’s improvements but think further multiple expansion will be difficult/modest without an acceleration in profit growth."

Revenue in the three months through January was $138.79 billion, while profits were $1.41 per share, both higher than Wall Street predictions. Operating income at Walmart's retail divison rose to $5 billion for the quarter, but margins are expected to be largely flat this year.

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Walmart's acquisition of Flipkart is the retailer's first foray into a market that could top $200 billion in the next decade. But new regulations that took effect in February to prevent e-commerce sites from offering products at deep discounts drew sharp backlash from Walmart.

"We were disappointed in the recent change in law and the lack of consultation," McMillon told investors on Tuesday. "We hope for a collarborative regulatory process going forward."