Walmart sees strong fiscal-year finish

Walmart topped Wall Street’s earnings forecast for its 2019 fourth quarter and fiscal year, as robust U.S. and e-commerce sales gains more than offset declines in its Sam’s Club and international businesses.

Net income for the quarter ended Jan. 31 totaled $3.69 billion, or $1.27 per diluted share, up from $2.18 billion, or 73 cents per diluted share, a year earlier, Walmart said Tuesday. Excluding a charge of 17 cents per share for a tax reform adjustment and an unrealized gain of 3 cents per share on the company’s investment in JD.com, adjusted earnings per share (EPS) were $1.41.

On average, analysts projected fourth-quarter adjusted EPS of $1.33, with estimates ranging from a low of $1.29 to a high of $1.42, according to Refinitiv/Thomson Reuters.

For fiscal 2019, Walmart posted net earnings of $6.67 billion, or $2.26 per diluted share, versus $9.86 billion, or $3.28 per diluted share, a year ago. The 2019 total reflects a charge of $1.54 per share for the sale of a majority stake in Walmart Brazil, an unrealized loss of 95 cents per share on the JD.com investment and a charge of 16 cents per share related to tax reform. Excluding those items, adjusted EPS for the 52 weeks was $4.91, the company said.

Analysts’ consensus estimate was for full-year adjusted EPS of $4.84, with projections running from a low of $4.79 to a high of $4.93, Refinitiv/Thomson Reuters reported.

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“We're encouraged by our performance for the year because we believe our customers are noticing our improvements. But we continue to see many ways we can serve them better,” Walmart President and CEO Doug McMillon, left, told analysts in a conference call Tuesday morning. “We're even more convinced they want us and expect us to bring our stores and e-commerce businesses together in a digitally connected, seamless way that makes shopping easier. We experienced a favorable economic environment in the U.S. for much of the year, and our associates made a lot happen to drive the strength of our results.”

At the top line, Walmart tallied overall revenue of $138.79 billion for the 2019 fourth quarter, up 1.9% from $136.27 billion in the prior-year period. Full-year revenue rose 2.9% to $510.33 billion from $495.76 billion.

In constant currency, Walmart’s revenue climbed 3.1% to about $140.5 billion for the quarter and 3% to approximately $515.1 billion for the year.

Fourth-quarter net sales for Walmart U.S. advanced 4.6% to $90.52 billion from $86.58 billion a year earlier. Fiscal 2019 net sales came in at $331.67 billion, up 4.1% from $318.48 billion in fiscal 2018.

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Walmart U.S. e-commerce sales grew 43% for the fourth quarter and 40% for the year in fiscal 2019, the Bentonville, Ark.-based retailer said.

Same-store sales for Walmart U.S. excluding fuel rose 4.2% year over year in the fourth quarter, reflecting gains of 0.9% in customer traffic, 3.3% in ticket size and 180 basis points in e-commerce. Including fuel, comparable-store sales also were up 4.2%. Full-year comp-store sales increased 3.6% excluding fuel and 3.7% including fuel.

At Sam’s Club, net sales fell by 3.7% to $14.91 billion in the fourth quarter and were down 2.3% to $57.84 billion for the year. Walmart said e-commerce sales at Sam’s surged 21% for the quarter; the company didn’t report the year-over-year change for fiscal 2019. Membership income increased 2.2% in the quarter.

Same-store sales at Sam’s were up 3.3% excluding fuel (3.7% with fuel) for the quarter and 3.8% excluding fuel (5.5% with fuel) for the year. During the quarter, excluding fuel, traffic rose 6.4% and ticket size decreased 3.1%. E-commerce sales edged up 90 basis points on a comparable basis.

Walmart International saw net sales dip 2.3% to $32.32 billion in the fourth quarter but rise by the same percentage to $120.82 billion for the full year. At constant currency, the division’s net sales were up by 2.7% to nearly $34 billion for the quarter and by 2.9% to $121.53 billion for the year.

“I am particularly encouraged by our sales results in the quarter. In Q4, Walmart U.S. grew comp sales 4.2% excluding fuel, e-commerce sales increased 43% and we gained market share in key categories such as grocery and toys, according to Nielsen and the NPD Group,” McMillon said in the call.

“We strive to make every day easier for busy families as we increased convenience and save them money and time, part of our strategy is to build on our existing strengths, such as having a broad assortment, including fresh and perishable foods within 10 miles of 90% of the U.S. population,” he explained. “Our stores and clubs are becoming more digital, and we're using technology to change how we work. More customers can now access our brand through multiple channels, and it's important that we engage them in different ways.”

During fiscal 2019, Walmart expanded online grocery delivery to about 800 locations and pickup to more than 2,100 locations in the U.S. The retailer said it expects to have 1,600 delivery and 3,100 pickup locations by the end of fiscal 2020.

“We've learned that those customers who shop with us both in stores and online spend about twice as much in total, and they spend more in our stores,” McMillon noted.

Chief Financial Officer Brett Biggs told analysts that Walmart “finished the year with good momentum” and therefore is reaffirming its previous guidance for fiscal 2020. Though not providing estimates, Walmart expects fiscal 2020 adjusted EPS to decline by low single digits year over year. However, excluding the impact of Flipkart, adjusted EPS is forecast to rise by low to mid-single digits.

Consolidated net sales at constant currency in fiscal 2020 are projected to increase 3%, with comp-store sales excluding fuel expected to grow 2.5% to 3% for Walmart U.S. and 1% for Sam’s Club (3% excluding both fuel and tobacco).

“Walmart U.S. e-commerce is expected to grow sales around 35% in fiscal year 2020, and we expect the quarterly growth to range around 30% to low 40%,” Biggs said.

Of the projected $11 billion in capital expenditures, the company plans to open fewer than 10 stores for Walmart U.S. and just over 300 stores for Walmart International, mainly in Walmart Mexico and China.