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Walmart’s online growth slows in Q4 as earnings miss mark

2/20/2018
Walmart reported mixed results for its fourth quarter as promotional activity and ongoing investments in its digital operations took a toll on earnings, and online growth slowed dramatically from the previous quarter.

The nation’s largest retailer reported net income of $2.17 billion, or 73 cents a share, in the quarter ended January 31, down from $3.76 billion, or $1.22 cents per share, in the year-ago period. Excluding one-time items that included restructuring charges and an impact from a one-time bonus to employees, Walmart earned $1.33 a share, four cents short of analysts’ estimates.

Neil Saunders, managing director, GlobalData Retail, said he was not overly concerned about the slump in net income because Walmart remains comfortably profitable, and because much of the deterioration is down to the various investments Walmart is making in future-proofing its business.

“We applaud this long-term view, especially as it is now being coupled with some rationalization and streamlining initiatives,” Saunders said.

Walmart’s same-store U.S. sales rose 2.6%, the 14th consecutive quarterly increase, and higher than projected. Same-stores sales at Sam’s Club division increased 2.4%.

Total sales increased 4.1% to $136.3 billion, topping Wall Street projections, amid a 1.6% rise in traffic at U.S. stores and a 1% increase in average ticket value. Online sales grew 23%, compared to a 50% increase in the prior quarter. The retailer said its online slowdown was expected as sales growth on Jet.com, which it acquired in 2016, cooled. It also cited operational snags related to inventory replenishment.

“The majority of this slowdown was expected as we fully lapped the Jet acquisition as well as creating a healthier long-term foundation for holiday,” stated Walmart CEO and president Doug McMillon. “A smaller portion of the slowdown was unexpected, as we experienced some operational challenges that negatively impacted growth.”

McMillon noted that, overall, the chain finished the year with e-commerce sales growth of more than 40%. “So, we feel better about the year than the quarter,” he said.
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