Wal-Mart’s Stock Plunges On Slower E-Commerce Growth In Q4
Wal-Mart (NYSE:WMT) reported mixed fiscal fourth quarter results on Tuesday, February 20, as its bottom line came in ahead of market expectations but revenues missed. The company also a posted full-year adjusted earnings per share guidance of $4.75 to $5.00, which is below the $5.13 per share consensus estimate. The weak guidance from Walmart is tied partially to an estimated fiscal 2019 tax rate of 24% to 26%, which was higher than some estimates. As a result, the company’s stock is down more than 10% in after-hours trading. Below we discuss some key takeaways from Wal-Mart’s earnings report and fiscal 2019 outlook using our interactive platform.
On a reported basis, the company’s revenue increased 4% year over year (y-o-y) to $136 billion, driven by growth in the domestic market due to its marketplace offerings. The retailer’s consolidated net income declined 42% y-o-y to $2 billion in the fourth quarter. Wal-Mart also posted diluted earnings per share of $0.73, down 40% y-o-y, largely due to the company’s e-commerce investments putting pressure on its bottom line. In terms of the company’s segments, Wal-Mart U.S. delivered a strong top line performance with comparable sales of 2.6%, which was above the consensus estimates of 2.0%. In addition, the retailer’s international sales grew 7% y-o-y to $33 billion during the quarter, led by strength at Walmex. Also, Sam’s Club comparable sales grew 2.4% y-o-y (ex. fuel) in the quarter, led by traffic.
Wal-Mart U.S. Continues To Grow
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At Wal-Mart U.S., strong comparable sales growth of 2.6% was driven by a 1.6% increase in customer traffic and a 1% increase in average ticket size. Overall, e-commerce contributed approximately 60 basis points to the segment in the fourth quarter. The gross margin declined 50 basis points in the quarter primarily due to price investments, higher transportation expenses and mix effects from its growing e-commerce business.
E-Commerce: Strong Growth Driver
Wal-Mart’s e-commerce operations include all web-initiated transactions, including those through Walmart.com such as ship-to-home, ship-to-store, pick up today, and online grocery, as well as transactions through Jet.com. Globally, on a constant currency basis, the company’s e-commerce sales and GMV increased 23% and 24% (including acquisitions), respectively, in this quarter. The majority of this growth was organic through Walmart.com, including online grocery, which is growing quickly. However, it should be noted that the e-commerce growth in Q4 decelerated from the 50% in the third quarter. The majority of this slowdown was expected as the company fully included the Jet acquisition. Overall, Wal-Mart finished the year with eCommerce sales growth of more than 40%. From a marketplace perspective, the company now covers more than 75 million SKUs to date.
Future Outlook
For fiscal 2019, Wal-Mart expects comparable sales growth of at least 2.0% for Wal-Mart U.S. It also expects Sam’s Club (ex. fuel) comparable sales growth to range between 3.0% to 4.0%. The company expects its adjusted EPS to range between $4.75 to $5.00, an increase of 7% to 13% compared with adjusted EPS of $4.42 in fiscal 2018.
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