Walmart Inc (NYSE: WMT) reported lower than expected fiscal fourth-quarter earnings as well as guidance that was quite shy of forecasts. These factors managed to overshadow a rise in fourth-quarter net income as the retailing giant issued guidance that didn't meet analyst estimates for the quarter ending Jan. 31.
Despite the fact that Walmart did not perform as expected during the holiday season due to "softer" sales of toys, media, gaming, and apparel, not all is that bad, far from it actually. E-commerce sales, that the retailer is investing heavily on, rose 35 percent. Revenue did rise 2.1% to $141.67 billion, but less than analysts expected which was $142.5 billion. U.S. comparable-store sales rose 1.9%, resulting in 12% rise in net income to $4.14 billion.
Adjusted earnings per share amounted to $1.38 versus the $1.44 expected. It is the lack of newness in gaming, a shorter holiday shopping season, and even a warmer winter that has beyond depressed sales of not only Walmart, but other retailers.
The trouble with the toy industry has also hit Target Corporation (NYSE: TGT), showing that the Toys R Us brand revamp can only go this far against the challenges the whole industry is facing. Despite Target still gaining market share in the segment, Toys saw flat sales after two very strong holiday seasons. On the other side, Amazon.com, Inc. (NASDAQ: AMZN) has crushed holiday results as it reported record sales with its prime membership that soared to 150 million paying subscribers.
For fiscal 2021, Walmart lowered its guidance as it expects adjusted EPS between $5 and $5.15 and sales growth of 3% at constant currencies, and Walmart U.S. comparable store sales growth of 2.5%. But these figures do not account for the impact of the Coronavirus pandemia.
The biggest challenge, shown by latest results, is that Walmart still makes a large chunk of money from physical stores and uses online shopping to drive shoppers to retail stores to pick up their purchases. Although grocery sales were boosted and number of stores that support online grocery increased, Amazon is way too far ahead with its Whole Foods segment.
And considering that e-commerce sales were up 41 percent during the previous quarter, 35 percent during the holiday quarter means something is not quite right. The Delivery Unlimited Service membership program surely needs to expand more quickly in the coming months as it is planned for an50% US coverage by the end of the year.
Walmart's e-commerce business has faced struggles during 2019, not to mention it is still unprofitable as its acquisitions in apparel haven't paid off as anticipated. And there was the political unrest in Chile, which disrupted the majority of its stores. But executives are confident of understanding the factors that weighted on the results and plans are being developed to address them.
And Walmart shares did climb 17.9% over the last 52 weeks so there are still good points. But competition is ruthless, and Walmart's position depends on how quickly will it further develop its online existence to add value for its customers.
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