Walmart holiday-quarter sales jump, says consumers still spending
(Adds details on online grocery program)
By Nandita Bose
Feb 19 (Reuters) - Walmart Inc posted its strongest
holiday quarter in at least a decade on Tuesday, boosted by
higher grocery and e-commerce sales, and said it saw no signs of
weakness in U.S. consumer spending despite recent signs of a
Online sales jumped 43 percent in the quarter helped in
particular by the expansion of Walmart's online grocery pickup
program to more than 2,100 stores by year end.
Shares of the world's largest retailer rose 2.2 percent on
Tuesday in a broadly flat market, putting them up 9.7 percent so
far this year.
Walmart and rival Target Corp's unexpectedly strong
growth in holiday sales reflected the health of the U.S.
consumer as spending remained robust due to a strong labor
market and cheaper gasoline prices.
"We still feel pretty good about the consumer. We haven't
seen much of a change," Walmart Chief Financial Officer Brett
Biggs told Reuters. "The data we are seeing still looks pretty
healthy. Gas prices are down year over year, which helps."
Investors and Wall Street analysts have been expecting U.S.
spending to slow this year, against a backdrop of rising debt,
trade tariffs and economic uncertainty. Walmart's results
settled nerves, but some doubts remain.
"There are definitely some storm clouds on the horizon,"
said Charles Sizemore, founder of Sizemore Capital Management
LLC, which owns Walmart shares. "A big example would be
delinquent loans in the auto sector which are rising ... the
consumer may be on hard times and in 2008 that was the prelude
to the global economic slowdown."
U.S. retail sales recorded their steepest drop in more than
nine years in December, the government reported last week, as
receipts fell across the board, suggesting a sharp slowdown in
economic activity at the end of 2018.
However, overall sales for the 2018 U.S. holiday shopping
season hit a six-year high as shoppers were encouraged by early
discounts, according to a Mastercard report in late December.
Walmart sales at U.S. stores open at least a year rose 4.2
percent, excluding fuel, in the fourth quarter ended Jan. 31.
The gain exceeded analysts' expectations of 2.96 percent,
according to IBES data from Refinitiv.
Sales were boosted by federal officials distributing food
stamp aid early during the partial government shutdown.
The demise of retailer Toys R Us also helped Walmart gain toy
market share, the company said.
Adjusted earnings per share increased to $1.41 per share,
beating expectations of $1.33 per share, according to Refinitiv.
But the retailer's gross margins declined for the seventh
consecutive quarter due to higher transportation costs and
ONLINE SALES JUMP
Walmart's 43 percent rise in online sales matched the
previous quarter's increase, and the company credited a broader
assortment on its website and improved delivery, as well as
store pickup of online grocery orders.
Higher online grocery sales helped it expand market share in
the category, Walmart said. It will have the store pickup
service at 3,100 stores by next January.
Walmart will offer grocery deliveries to about 800 more
stores by the end of the year, bringing the total to 1,600
But the company reiterated that it expected e-commerce
losses to increase this year due to ongoing investments. Chief
Executive Officer Doug McMillon said on a conference call the
company was focused on getting return customer visits and
strengthening product assortment.
Grocery sales currently make up 56 percent of total revenue
for the retailer. Amazon.com Inc is trying to crack the
food category, especially since it bought organic supermarket
chain Whole Foods.
Walmart is partnering with third-party couriers and working
with so-called gig, or freelance, drivers, who are cheaper than
full-time employees, to push down costs, Reuters recently
Google-backed Deliv, a Walmart delivery partner in
Miami and San Jose, ended its relationship with the retailer,
Reuters reported last week.
The U.S. retailer, which overtook Apple Inc to
become the third largest e-commerce retailer last year, is
likely to capture a 4.6 percent share of the U.S. e-commerce
market, behind eBay Inc and Amazon, according to
research firm eMarketer.
Walmart repeated its forecast that fiscal year 2020 earnings
per share would decline in the low single digits in percentage
terms, compared with last year. Excluding the acquisition of
Indian e-commerce firm Flipkart, it sees an increase in the low-
McMillon said the company was disappointed in India's
revised e-commerce regulations, which ban companies from selling
products via firms in which they have an equity interest and
also bar them from making deals with sellers to sell exclusively
on their platforms.
He said the Indian government didn't consult with Walmart
and other U.S. companies before it changed the rules. "We hope
for a collaborative regulatory process going forward, which
results in a level playing field," he said.
Walmart expects fiscal year 2020 comparable sales growth of
2.5 percent to 3 percent, excluding fuel and online sales growth
of 35 percent.
Total revenue increased 1.9 percent to $138.8 billion,
beating analysts' estimates of $138.65 billion. Walmart has
recorded 18 quarters, or over four straight years of U.S.
comparable sales growth, unmatched by any other retailer.
The stock rose 3.7 percent to $103.68. Target and Costco
Wholesale Corp were both up more than 1 percent.
(Reporting by Nandita Bose in Washington; Editing by Jeffrey
Benkoe and Bill Rigby)
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