E-Grocery, Ecommerce Bright Spots In Walmart’s Q4

Softer-than-expected holiday sales drove Walmart’s Q4 2019 earnings below expectations, but strong ecommerce and e-grocery sales provided buoyancy and optimism for the year ahead.

“In Q4, we saw strong performance in the U.S. with ecommerce and Sam’s Club plus strength in Mexico, India and China,” Walmart President and CEO Doug McMillon told investors in an analyst call. “We started and finished the quarter with momentum, while sales leading up to Christmas in our U.S. stores were a little softer than expected. The new year has started off well, and we look forward to another strong year.”

Total Q4 revenue was $141.7 billion, up $2.9 billion or 2.1% from 2019, but lower than the projected figure of $142.55 billion. Adjusted EPS came in at $1.38 vs. expectations of $1.44, Yahoo Finance reported.

Walmart’s U.S. ecommerce sales grew 35% in Q4, fueled largely by e-grocery pickup and delivery, propelling walmart.com to its highest quarterly growth rate of the year.

“Due to the sheer increase in availability, consumers are starting to try out online grocery, and it seems many are happy with what they are getting,” Keith Anderson of Profitero told Forbes, citing Amazon and Kroger as Walmart’s main competitors in the online grocery sector. In October, Amazon made grocery delivery free for Prime members.

Walmart ended fiscal year 2020 with nearly 3,200 grocery pickup locations and more than 1,600 delivery locations in the U.S. Among many initiatives to optimize the online grocery businesses, Walmart launched Delivery Unlimited, a Prime-like grocery delivery membership program, and Walmart InHome Delivery to bring groceries and daily essentials directly to customers’ homes.

It also introduced voice ordering for e-grocery orders, a pilot program with autonomous vehicle company Nuro for grocery delivery, and took part in the USDA’s SNAP online purchasing pilot.

Other Q4 highlights:

  • S. comp sales increased on a two-year stacked basis by 6% with continued strength in food and consumables
  • Sam’s Club comp sales increased 0.8%
  • Net sales at Walmart International were $33 billion, up 2.3%. Disruption in Chile negatively affected operating income by approximately $110 million

“The fourth quarter started and ended strong with solid sales growth through Cyber Monday and in January,” said Walmart CFO Brett Biggs. “In the few weeks before Christmas, we experienced some softness in a few general merchandise categories in our U.S. stores. However, Walmart U.S. grocery sales and ecommerce sales were strong throughout the quarter.”

Walmart’s FY 2020 highlights include:

  • Total revenue of $524 billion, up $9.6 billion, or 1.9%
  • U.S. comp sales increased 2.8%, and 6.4% on a two-year stacked basis
  • U.S. eecommerce sales up 37%
  • Sam’s Club comp sales increased 0.7%, negatively impacted by reduced tobacco sales
  • International net sales increased 2.8% in constant currency, with strength in Mexico, China and India.
  • $25.3 billion in operating cash flow and returned $11.8 billion to shareholders through dividends and share repurchases

Among FY 2020 initiatives to drive ecommerce growth, Walmart launched free next-day delivery from Walmart.com, and partnered with actress Sofia Vergara to launched an exclusive line of denim on Walmart.com.

Walmart’s 2021 guidance calls for net sales growth of 3%, comp sales growth in the U.S. of at least 2.5%, and U.S. ecommerce growth of around 30%.

“With an ability to drive profitable growth while simultaneously investing in new technology/capabilities, Walmart’s strong omnichannel competitive positioning should persist for the foreseeable future,” analyst firm Baird told Seeking Alpha.

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