Walmart beats estimates; remains focused on competitive pricing

Walmart Inc. reported fourth-quarter earnings and sales that beat estimates on the heels of strong holiday results and increased traffic to its stores and e-commerce site.

The retail giant reported net income of $3.56 billion, or $1.28 per share, for the quarter ended Jan. 31, compared to a loss of $2.09 billion, or $0.74 per share, in the year-ago period. Adjusted earnings per share of $1.53, ahead of analysts’ estimates for $1.50.

Total revenue inched up 0.5% to $152.87 billion from $152.08 billion, negatively affected by $10.2 billion due to divestitures, topping estimates for $151.72 billion. E-commerce sales edged up 1% year-over-year but jumped 70% on a two-year stack.

“We know that consumers are focused on inflation, and we’re continuing to watch key item pricing to ensure that we help them through this,” CFO Brett Biggs told CNBC. “This type of environment plays to our strengths.”

Walmart U.S. comp sales, excluding fuel, rose 5.6% with transactions up 3.1% and average ticket up 2.4%. The company cited market share gains in grocery, with comp sales in the high single-digits. Comp-sales in health and wellness were in the mid-teens, reflecting increased scripts, including COVID vaccine administration.

At Sam’s Club, fourth-quarter net sales excluding fuel rose 10.6% and same-store sales increased 10.4% and 21.2% on a two-year basis. Membership income grew by 9.1% in the fourth quarter.

At Walmart International, sales fell 22.6% to $27 billion, impacted by $10.1 billion due to divestitures.

The company said that it navigated higher supply chain costs and pandemic-related challenges  during the quarter while executing strategic initiatives. It  $400 million in higher-than-expected supply chain costs during the quarter

Walmart remodeled more than 140 stores during the quarter and plans to remodel 600 stores this year. In January, the chain unveiled an upgraded store design. The physical elements include lighting, space enhancements and dynamic displays.

The retailer now has grocery pickup in 4,600 locations and same-day delivery from 3,500 stores. The company said the number of  customers utilizing Walmart's has increased six-fold compared to pre-pandemic.

“We had another strong quarter to finish off a strong year,” stated Doug McMillion, president and CEO, Walmart. “We have momentum in our business in all three segments. We’re being aggressive with our plans and executing on the strategy.”

For the full year, Walmart’s total revenue rose 2.4% to $572.8 billion, negatively affected by $32.7 billion related to divestitures.

Walmart U.S. comp sales increased 6.4% and 15.0% on a two-year stack; U.S. e-commerce sales grew 11.0% and 90% on a two-year stack.

Walmart’s global advertising business, Walmart Connect, reached $2.1 billion  for the full year. In the U.S., active advertisers using the service increased 136%. On the earnings call, McMillion said that he expects the business to continue to grow into a  "top 10 ad business in the mid-term.”

For its new fiscal year, Walmart is expecting U.S. comp sales growth of slightly above 3%, excluding fuel, and earnings per share growth in the mid-single digits. Analysts were looking for U.S. comp growth of 2.7% and earnings per share of $6.70.

Walmart also raised its annual dividend about 2% to $2.24 per share for fiscal 2023. The first installment of $0.56 per share will be paid on April 4 to shareholders of record as of March 18. The retailer said it plans to repurchase $10 billion of its own stock in fiscal 2023.