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Walmart shares fall on earnings miss, retailer sees sales growth slowing in coming year

Walmart on Thursday reported fourth-quarter earnings that fell short of Wall Street's expectations as the retailer aims to turn the strength of its e-commerce business during the pandemic into lasting momentum and higher profits by boosting investment.

Walmart shares closed Thursday down 6.48% to $137.66, after investors reacted to the retailer's warning that it expects sales to moderate this year. It said earnings per share will decline, but will range flat to slightly higher after excluding divestitures. The company's market value is now $389.48 billion.

The big-box retailer has benefited from pandemic trends, as Americans buy more groceries, cleaning products and other essentials. It also got a boost in the fiscal fourth quarter as many customers spent their stimulus checks. But the pandemic has also increased its costs — in the fourth quarter alone Covid-related expenses tallied $1.1 billion.

Part of Walmart's recent strength has come from investments it made long before the health crisis to boost its online business so it could provide services like curbside pickup and speedy delivery.

Walmart CEO Doug McMillon said at a virtual investor conference Thursday that it is retooling its business to better serve customers, tap new revenue streams and create a diverse ecosystem of services, from delivering groceries to people's fridges to offering annual health checkups and new kinds of financial services. It's also bulking up its advertising business.

"Think of it as a flywheel that's spinning, powered by a mutually reinforcing set of assets," he said, in explaining how each of the businesses will support each other.

He said it will step up investments to adjust to the significant ways the pandemic has transformed the retail business. For example, he said Walmart will spend on automation to speed up the number of curbside pickup orders it can fill.

All told, Walmart is targeting about $14 billion in capital expenditures this fiscal year, up from a rate of $10 billion to $11 billion, as it invests in supply chain, automation and improvements to the customer experience, the company's CFO Brett Biggs said.

McMillon described Walmart+, its subscription service, as "an important piece of our strategy." He said the membership program, which launched in the fall, will drive repeat purchases by customers and give the company valuable data it could use to tailor their experience and grow its ads business. The service costs $98 a year or $12.95 a month.

He said it will also boost the wages of U.S. workers, raising the average for hourly employees to above $15 per hour. 

"This is a time to be even more aggressive because of the opportunity we see in front of us," he said in a news release. "The strategy, team and capabilities are in place. We have momentum with customers, and our financial position is strong."

Stimulus boosted sales

In the latest quarter, Walmart's e-commerce sales in the U.S. grew by 69% — a large number, but the slowest growth rate since the start of the global health crisis. Same-store sales in the U.S. grew by 8.6%, higher than the 5.8% increase expected by a StreetAccount survey. Its membership subsidiary Sam's Club also reported low single-digit same-store sales growth, excluding fuel and tobacco.

For the three months ended Jan. 31, Walmart posted a loss of $2.09 billion, or 74 cents per share, compared with earnings of $4.14 billion, or $1.45 share, a year earlier.The company said a loss on its U.K. and Japanese operations reduced earnings by $2.66 per share, which was partially offset by a gain of 49 cents per share on equity investments.

Excluding these and other items, Walmart earned $1.39 per share, missing analyst estimates. Analysts surveyed by Refinitiv had expected Walmart to earn $1.51 per share.

Total revenue grew by 7.3% to $152.1 billionfrom $141.67 billion a year earlier, toppingWall Street's expectations of $148.30 billion.

Sam's Club reported same-store sales grew by 8.5% excluding fuel and tobacco, while its e-commerce sales jumped by 42%.

Biggs told CNBC the company could get another boost if the government approves a new round of stimulus payments.

"When money hits we see spending pick up pretty quickly and I would anticipate if we get another round of stimulus, which is obviously being debated, that we would see something similar," he said.

E-commerce sales growth ebbs

The decelerating pace of e-commerce growth rate points to some challenges it will face as tailwinds from the global health crisis trends fade. More Americans are getting Covid vaccines and can spend their budget in other ways, such as going out to dinner or filling up the gas tank on a commute back to the office.

Walmart is also under pressure to turn thriving parts of its business into money-makers. Online services that have gained popularity, such as curbside pickup, require additional labor as employees pick and pack orders. That translates to higher labor costs that Walmart has not been passing on to its customers, even as more take advantage of the convenience of shopping online.

Walmart's e-commerce business has had dramatic gains, but it has not yet turned a profit. However, Biggs said its e-commerce margins continue to improve.

Walmart is raising its dividend by a penny to 55 cents per share and approved a $20 billion stock buyback program.

Read the full press release here.

—CNBC's Courtney Reagan contributed to this report.

UPDATE: The Refinitiv estimate was adjusted to exclude the impact of a U.K. tax issue.


Walmart earnings top estimates, fueled by strong grocery sales and back-to-school spending

Walmart on Tuesday reported second-quarter earnings that exceeded Wall Street expectations as the retail giant gained ground in groceries and had a strong start to the back-to-school season.

Shares closed Tuesday down 0.03% to $150.70.

The discounter also sharpened its forecast for the year, saying it now anticipates that earnings per share will range from $6.20 to $6.35. It said it expects Walmart U.S. same-store sales to increase by 5% to 6%, excluding fuel.

Chief Financial Officer Brett Biggs said in an interview with CNBC that customers flocked to stores for items like luggage, party supplies and apparel as they were "coming out of hibernation." Plus, he said, families have been buying backpacks and items for the classroom.

Biggs said the company is watching the delta variant closely as Covid cases rise, but it has not seen a change in customers' shopping patterns.

"Mask wearing is back up again, but runs on supplies — things we saw in last March, April [of 2020] — we really haven't seen again," he said.

CEO Doug McMillon said in a news release that the company grabbed more market share in grocery, one of its core businesses. He said it has also made progress in new areas, adding thousands of online sellers to its third-party marketplace and nearly doubling advertising sales in Walmart U.S. in the quarter versus a year ago. 

Here's what the company reported for the fiscal second quarter ended July 31, according to Refinitiv consensus estimates:

  • Earnings per share: $1.78 adjusted vs. $1.57 expected
  • Revenue: $141.05 billion vs. $137.17 billion expected

Walmart is lapping a year-ago quarter when stimulus checks lifted sales despite limited store hours and customers' concerns about Covid-19. Last year, Walmart faced new competition as some customers chose to buy groceries at smaller or more convenient supermarkets during the pandemic. Walmart also saw a shift toward e-commerce, as other shoppers looked to avoid going inside stores.

Over the past two quarters, the discounter said some of those major trends have reversed. Walmart is gaining market share in grocery again, according to Nielsen data, as consumers return to old habits. Its food sales grew $2.4 billion versus a year ago, as Walmart attracted shoppers with lower prices and better managed to keep produce, meats and more in stock, Biggs said on an earnings call.

Customers have also swung back to shopping more at stores. Walmart U.S. transactions rose by 6.1% but the average ticket fell nearly 1%. Same-store sales gained momentum each month during the quarter, Biggs said.

Growth of sales at stores and online have slowed, however, when compared with a frenzied period of buying food and items for the home during the earlier part of the health crisis. Walmart's same-store sales in the U.S. grew by 5.2%, higher than the increase of 3.3% expected by analysts, according to a StreetAccount survey, but lower than the 9.3% it saw in the same quarter a year ago. Over the past two years, the retailer said its same-store sales have increased by 14.5%.

E-commerce sales gains in the U.S. have dropped off significantly, too, growing 6% in the second quarter versus 97% in the year-ago period. They had risen by 37% in the first quarter and 69% in the fourth quarter. Looking over the past two years, however, the retailer said e-commerce sales have doubled.

Walmart said it expects its global e-commerce sales to reach $75 billion for the year.

Walmart reported net income fell to $4.28 billion, or $1.52 per share, from $6.48 billion, or $2.27 per share, a year earlier. Excluding items, the company earned $1.78 per share. Analysts were expecting Walmart would earn $1.57 per share, according to Refinitiv.

Walmart reported its highest quarterly revenue ever for a three-month period outside of the holiday season.Total revenue rose by 2.4% to $141.05 billion from $137.74 billion a year earlier, exceedingWall Street's expectations of $137.17 billion.

Walmart U.S. CEO John Furner said on an earnings call that the company's huge size has helped it navigate supply chain challenges and inflation pressure. He said the company has chartered its own vessels to import goods and secured supplies earlier, so it is prepared for the third and fourth quarter.

By selling more food and other goods, he said it can keep its price increases modest.

Same-store sales for Walmart subsidiary Sam's Club increased by 7.7% excluding fuel — more than the 3.7% growth expected by analysts.

The company said it anticipates that same-store sales at Sam's Club will increase this year by 7.5% to 8.5%, excluding fuel and tobacco.

Walmart shares have trailed other pandemic beneficiaries in the retail industry. As of Monday's close, Walmart shares were up about 5% this year compared with Target and Kroger, which have seen shares increase 49% and 37%, respectively, in 2021. It also lags behind the S&P 500's 33% gain.

Read the company's press release here.

—CNBC's Courtney Reagan and Robert Hum contributed to this report.

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Walmart+ is gaining momentum, hits 32 million members, Deutsche Bank estimates

Walmart's membership program, Walmart+, is gaining momentum and attracting younger, higher-income shoppers, according to a research note published Tuesday by Deutsche Bank.

The subscription service — which launched almost exactly one year ago — has grown to an estimated 32 million U.S. households, according to the equity research firm's monthly surveys of consumers. In the note, retail analyst Krisztina Katai said Walmart+ has hit an "inflection point" after months of slower growth.

About 25% of respondents said in June and July that they have Walmart+, Deutsche Bank said. That's up from prior months, where penetration hovered around 19%. In comparison, about 57% of survey respondents said they belong to competing membership program Amazon Prime, according to the most recent survey.

There is significant overlap with the programs: About 86% of current Walmart+ subscribers have Amazon Prime, according to Deutsche Bank's survey. They have similar demographics, too: About 61% of Walmart+ members earn an annual household income of more than $50,000, and 33% make $100,000 or more per year, versus 63% and 28% with Prime members, respectively.

Walmart, the country's biggest grocer, debuted the membership program as a way to encourage customer loyalty, drive more frequent sales and beat competitors with convenience. However, Walmart has offered few specifics about the performance of Walmart+ and has not revealed its membership numbers.

A Walmart spokesperson declined to comment on the report.

The program costs $99 a year or $12.95 on a month-to-month basis. One of its key perks is free unlimited grocery deliveries to the home for orders of $35 or more. It also includes benefits such as fuel discounts and access to a Scan-and-Go app that allows people to skip the checkout line.

Over time, Walmart has sought to sweeten the deal with new perks, such as prescription discounts. It also dropped its online shipping minimum, bringing the company in line with Amazon's Prime membership and allowing people to get a single item delivered next-day or in two days.

Amazon Prime costs $119 a year, or $12.99 on a monthly basis. An Amazon Prime membership includes free shipping as well as perks such as video, music, gaming and book streaming.

Walmart CEO Doug McMillon said Thursday at a virtual conference hosted by Goldman Sachs that the company is focused on the customer experience rather than the subscriber count. First, he said, Walmart must expand capacity to fulfill a larger volume of online grocery orders.

To do that, Walmart is converting dozens of its stores into mini-warehouses with high-tech, automated systems that help employees pick and pack orders.

"The worst thing we could do is to really aggressively market this, get a bunch of members that are disappointed because they can't get a slot or they don't get the right in-stock level or some other problem happens," he said. "So the primary focus we have is on that quality of the experience, delivery of pickup, and that Net Promoter Score."

Walmart recently hired a new executive to oversee the membership program. It tapped Chris Cracchiolo, a 19-year veteran of American Express, who began in July. The credit card company, which charges a hefty annual fee, is known for its loyal following and members-only perks, such as early access to concert tickets.

Walmart's Chief Customer Officer Janey Whiteside also worked at American Express before joining the big-box retailer.

Deutsche Bank has a buy rating for Walmart, with a price target of $185. Walmart's shares were trading around $144 on Tuesday afternoon. Its share growth has been roughly flat this year.

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Walmart earnings beat estimates as retailer sees robust grocery sales, e-commerce growth

Walmart on Tuesday reported first-quarter earnings that surged past Wall Street's estimates as the company reported strong grocery sales and e-commerce growth and raised its outlook for the year.

Shares closed Tuesday up 2.2% to $141.91.

The big-box retailer said more shoppers have headed to its stores and website to spend stimulus checks and to get ready to socialize again as Covid cases decline and vaccination rates rise. 

E-commerce sales in the U.S. rose by 37%, even as consumers returned to more typical patterns. The retailer faced tough comparisons to the year-ago quarter, a time when shelter-in-place orders prompted customers to stock up on food and household items and make more purchases online.

Walmart Chief Financial Officer Brett Biggs said in an interview that the company is seeing "pent-up demand" and expects that to continue. He said customers are still buying items that were popular during the pandemic, such as bicycles and printers, but have also begun to purchase things like teeth whitener as they take off their masks.

"You can tell people are starting to get back out," he said.

The company raised its outlook for the fiscal year. It expects earnings per share and Walmart U.S.'s operating income to increase in the high single-digits. It reiterated its guidance that Walmart U.S. and Sam's Club same-store sales will grow in the low single-digits, excluding fuel and tobacco.

"Stimulus helped in Q1, and because of that, we increased profit and revenue guidance," Biggs said. He said the company also boosted its outlook because of what it has seen in the second quarter.

Here's what the company reported for the fiscal first quarter ended April 30, compared with Refinitiv consensus estimates:

  • Earnings per share: $1.69 adjusted vs. $1.21 expected
  • Revenue: $138.31 billion vs. $131.97 billion expected

In the quarter, Walmart reported net income rose to $2.73 billion, or 97 cents per share, from $3.99 billion, or $1.40 per share, a year earlier. Excluding items, the company earned $1.69 per share. Analysts were expecting Walmart would earn $1.21 per share, according to Refinitiv.

Total revenue grew by nearly 3% to $138.31 billion from $134.62 billion a year earlier, exceedingWall Street's expectations of $131.97 billion.

Walmart's same-store sales in the U.S. grew by 6%, higher than the 0.9% increase expected by analysts surveyed by StreetAccount. The company said those sales got a lift from grocery sales, as it gained market share. Transactions declined by 3.2%, but average ticket growth increased by 9.5%.

Same-store sales for Walmart subsidiary Sam's Club jumped by 7.2% excluding fuel — more than the 1.2% growth expected by analysts. The company said membership at the warehouse club also reached an all-time high.

Walmart International's net sales were $27.3 billion, a drop of 8.3% year over year, partially due to the company divesting parts of its global business. Its e-commerce sales increased by 49% in that segment, however. The company recently sold Asda, a British supermarket chain, and the majority stake of Seiyu, a Japanese supermarket chain.

Read the company's press release here.


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