Earnings

Walmart Draws Digital Bead On Amazon

Strong Q4 earnings are in the rearview mirror for the juggernaut of retail. And In one metric of note, Walmart’s online sales are growing even more quickly than Amazon’s. Get ready for the great eCommerce race to quicken its pace.

The biggest retailer in the world showed some surprising things Tuesday: speed and agility. As in: The company is gaining traction in its bid to be a bit more nimble, a bit more digital, and a bit more alluring to shoppers even in its brick and mortar locations.

This time around, Walmart beat on revenue but missed slightly on earnings — though the tone in the headlines as the news of Walmart’s most successful all-around quarter in four years broke indicate the slight miss wasn’t anyone’s focus: “The Turn-Around Is Real” crowed the earnings write-up in InvestorPlace — “Move Over Amazon; Here Comes Walmart,” noted the team over at CNN Money.

And what the headlines don’t say — the investor reaction does. Walmart’s stock moved 2 percent higher in pre-market trading and managed to stay up throughout the day. Walmart was also credited with pushing the big stock rally forward for another day or two.

That’s quite a far cry from a week ago when Walmart was credited with being a harbinger of retail’s approaching doom when the news broke that investing sage Warren Buffett had unloaded nearly all of his Walmart shares during Q4 2016.

“As I step back and look at the retail landscape, customer expectations continue to change rapidly,” Walmart CEO Doug McMillon noted in his post-earnings debrief with investors. “They will increasingly expect even more personalization and convenience in their shopping experience. We’re moving quickly to respond to the current opportunities as well as to innovate and transform the shopping experience for our customers in the future. And while we must do more, we believe we’re on the right track as we work to be the most trusted retailer for our customers, provide ongoing opportunity for our associates and deliver results for our shareholders.”

So how did delivering those results look during the last quarter of 2016?

By The Numbers

One quarter’s results do not a trend make, but earnings were better than expected at $1.30 — about a penny ahead of the Street’s predictions. Revenues clocked were just shy of expectations, at $130.9 million versus $131 million that had been projected by analysts (and FX and food deflation are the culprits for that revenue miss.)  Blanancing out that miss, however, was a larger than expected gain in same-store sales — which were up 1.8 percent, fairly far ahead of the 1.3 percent analysts were looking for.

Internationally, net sales were up 3 percent excluding currency fluctuations — but down 5.1 percent when including their impact.

Sam’s Club also had a reasonably strong quarter — with comparable store sales up 2.4 percent excluding fuel.

For fiscal 2018, Walmart expects to earn between $4.20 a share and $4.40 a share, compared with an estimate of $4.33. That includes profit of 90 cents per share to $1 per share in the first quarter.

And then, there’s the big number — and the one that got everyone’s attention. Walmart’s eCommerce revenue in the United States rose 29 percent in the U.S. from a year ago, hence all the “look-out Amazon” headlines: the house that Bezos built “only” notched 22 percent in the same time period.

Granted, Walmart spent billions of dollars to get there — particularly its ~$3 billion acquistion of Jet.com last year — but some things in life (like out pacing Amazon at eCommerce if you’re Walmart) are actually priceless.

And, McMillon told his investors — Walmart eCommerce is just getting warmed up.

“We’re the second-largest U.S. online retailer by revenue, one of the top three online retailers by traffic and our Walmart app is among the top three apps in retail. We acquired Jet.com in the second half of last year and welcomed Marc Lore, the CEO of our U.S. eCommerce business. Marc is moving quickly. From a marketplace perspective, we now have over 35 million SKUs — more than quadrupling the number available at the beginning of the year. We recently announced free 2-day shipping on millions of items with a minimum order of $35. And, as you might expect, we’ve seen a nice uptick in our eCommerce business since this launch. We’re also leveraging the strengths of Walmart and Jet to make both platforms better — I’m excited about what’s to come.”

The Commerce Highlights

So, we’ve dispensed with the headline numbers. Digging into the meat of commerce itself, both online and offline, there was an acceleration of activity that might, just might, give other uber retailers a bit of pause.

Walmart has reported 10 consecutive quarters of same store sales growth.  As we noted,  in the latest period the firm posted sale stores growth of 1.8 percent, better than analysts’ projections that the firm would see a boost of 1.3 percent. The majority of the discrepency? Online did much, much better than anyone was forecasting and contributed a full 40 basis points (80 percent of the gap between prediction and reality) to the overall sales result.

What were people buying?  Clothes, food and health-related items. What weren’t they buying?  Electronics, media and gaming were soft. Grocery was something of a mixed bag for Walmart. According to Chief Financial Officer Brett Biggs, comparable sales in grocery were up in Q4, pushed by holiday shopping and online grocery ordering — though deflationary pressures in food pricing took a toll.  On the whole, grocery accounts for 53 percent of Walmart’s business.   “We were particularly pleased with the positive comp in Grocery despite ongoing market deflation in food, which negatively impacted the Food comp by approximately 90 basis points,” Biggs told investors.

Walmart was also pushing its multi-channel sales experience during its earnings call — noting that the Supercenter was “still the best retail format in the world,” and as such the one best suited to serve consumer needs in a variety of contexts — online, in the real world and at every hybridized spot in between.

“Throughout the 6-week holiday season, customers responded well to consistent everyday low prices and a simplified integrated multi-channel experience that enabled last-minute shopping so they could find the perfect item,” Biggs noted.

Walmart was also touting how much more mobile-enabled it has become — McMillon noted that 70 percent of the online sales through the Black Friday and Cyber Monday periods were done through mobile devices.

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