Business
Walmart Has Kept Strong Sales Throughout The Pandemic Period And Increased Cost To Boost Its Business
Feb
First American News LLC-Raleigh, NC: Walmart Inc. is the country’s largest retailer by revenue has helped it navigate higher supply-chain and wage costs, labor shortages, and rising prices. During an interview, the retailer said it expects stronger sales this year.
On Thursday Walmart reported stronger sales over the winter holiday shopping season and said it is largely absorbing higher costs. At the same time, it continues to try to create new sources of profit beyond its core retail business to help fend off Amazon, said Gaby Mendoza of MB Daily News.
Comparable U.S. sales, those from stores and digital channels operating for at least 12 months excluding fuel sales, rose 5.6% in the quarter ended Jan. 28, compared with the same period a year earlier.
Overall, Walmart’s U.S. business benefited from its stores being stocked and stronger foot traffic. The grocery and health and wellness categories were standouts, the company said, the latter of which was helped by more people filling prescriptions and the company’s administration of the Covid-19 vaccine. Transaction volume rose 3.1% in the quarter.
“During periods of inflation like this, middle-income families, lower-middle-income families, even wealthier families become more price-sensitive and that’s to our advantage,” said Walmart Chief Executive Doug McMillon on a call with analysts Thursday.
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Walmart uses its scale to muscle lower prices from its suppliers and manufacturers, while it has largely stuck to an everyday-low-price ethos with pricing for decades.
Retailers continue to benefit from strong consumer spending. January retail sales, which reflect spending at stores, online and in restaurants, rose at a seasonally adjusted rate of 3.8% from the prior month, according to the Commerce Department. However, economists attributed a chunk of that increase to consumers paying higher prices.
The retailer, based in Bentonville, Ark., said it faced cost increases during the most recent quarter, but kept profits growing. Supply-chain costs were over $400 million higher than expected at the start of the quarter, the company said.
Wage costs increased too. Covid-19-specific paid-leave costs were more than $400 million due to the Omicron variant, $300 million more than expected, the company said. Walmart said last week it would stop offering employees paid-time off specifically linked to Covid-19 by the end of next month.
“This quarter’s Covid leave peak was larger than anything we had experienced in 2020 or previously in 2021,” said Mr. McMillon. “We hired more associates than our plan called for to help fill that gap, which hurt expenses, but it was clearly needed.”
The company swung to a profit of $3.56 billion, or $1.28 a share. For the year-earlier quarter, Walmart reported a net loss of $2.1 billion, reflecting losses tied to the then-pending sales of its U.K. and Japanese operations.
Excluding special items, Walmart posted per-share earnings of $1.53, ahead of the $1.50 forecast by analysts polled by FactSet.
Overall revenue rose less than 1% from a year ago to $152.9 billion, in part due to the sale of some international units.
Shares in Walmart rose 4% Thursday, while the broader Dow Jones Industrial Average slid 1.8%.
While the pandemic brought a dramatic boom to e-commerce, that trend is reversing as health-related restrictions ebb and more spending shifts to services. Walmart’s e-commerce sales growth slowed during the quarter as more sales happened in physical stores than earlier in the pandemic. Global e-commerce sales were $73.2 billion in the most recent fiscal year, nearly double 2020 levels but slightly below its forecast of $75 billion.
Investors sent shares in Shopify Inc. lower Wednesday after the e-commerce software provider said it expected revenue growth to moderate in 2022 from the last couple of years.
Walmart will soon turn to longtime executive Tom Ward to lead its U.S. e-commerce business after the company recently announced that the current chief would leave after a year in the job. The company is focused on faster delivery and increasing the volume of products listed by third-party sellers, executives have said in recent months. For an online retailer such as Amazon.com or Walmart, sales by third parties that list products on its website are typically more profitable than its direct sales.
Walmart executives said Thursday they aim to have 200 million products listed on Walmart.com by the end of the year, up from 170 million currently.
The retail behemoth continues to operate with high inventory levels to counteract supply-chain snarls that have challenged retailers throughout the pandemic. Inventory levels were up 26% globally during the latest quarter.
For the current year, Walmart predicted slower growth compared to pandemic highs and lower costs associated with Covid-19. Comparable U.S. sales are projected to increase slightly more than 3% from the prior year, with earnings-per-share growth of 5% to 6% when excluding divestitures. Those estimates assume “some degree of relief from costs associated with Covid-19 and disruptions in the supply chain,” and a relatively flush consumer, the company said.
Walmart is in the midst of trying to build profits and revenue from sources beyond its traditional retail business, including through advertising, a financial technology startup, healthcare, and offering other retailers delivery services. The company said net sales from advertising reached $1.6 billion last fiscal year.
Walmart said it planned to spend at least $10 billion on share buybacks in the current fiscal year, after spending $9.8 billion on repurchases in the last year. It plans to spend around 2% to 3% of sales on capital investments, including fulfillment networks, automation, store remodels and technology, said Walmart Chief Financial Officer Brett Biggs.
