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Walmart shares plunge on misplaced income, retailers see gross sales development gradual within the coming yr

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Walmart on Thursday reported fourth quarter earnings that fell short of Wall Street's expectations as the retailer seeks to convert the strength of its e-commerce business into lasting momentum and higher profits through increased investments during the pandemic.

Shares fell nearly 6% Thursday morning as investors responded to the retailer's warning that sales are expected to be moderate this year. Earnings per share will fall, but after the exclusion of sales will be unchanged or slightly higher.

The big box retailer has benefited from pandemic trends as Americans buy more groceries, cleaning products, and other essentials. There was also a boost in the fourth quarter of the fiscal year as many customers issued their stimulus checks. But the pandemic has also increased its costs – in the fourth quarter alone, spending on Covid was $ 1.1 billion.

Part of Walmart's recent strength can be attributed to investments made long before the health crisis to boost its online business and provide services like roadside collection and fast delivery.

Doug McMillon, CEO of Walmart, told a virtual investor conference Thursday that the company is retooling to better serve customers, find new revenue streams, and create a diverse ecosystem of services, from delivering groceries to people's refrigerators through to annual health checkups and new types of funding services. It is also building its advertising business.

"Think of this as a spinning flywheel powered by a mutually reinforcing set of resources," he said, explaining how each company will support one another.

He said it will step up investment to adapt to the significant changes in the retail retail pandemic. For example, he said Walmart will spend on automation to speed up the number of roadside pickups it can do.

Overall, Walmart is targeting approximately $ 14 billion in investment this fiscal year, from $ 10 billion to $ 11 billion as the company invests in supply chain, automation and customer experience enhancement, said the company's chief financial officer, Brett Biggs.

McMillon described Walmart +, its subscription service, as "an important part of our strategy". He said the membership program, which launched in the fall, will drive repeat purchases from customers and provide the company with valuable data that it can use to customize its experience and grow its advertising business. The service costs $ 98 per year or $ 12.95 per month.

He said it will also raise US workers' wages and raise the average hourly employee to over $ 15 an hour.

"This is a time to be even more aggressive because we see the opportunity we have ahead of us," he said in a press release. "The strategy, the team and the skills are in place. We have momentum with customers and our financial position is strong."

Stimulus increased sales

In the last quarter, Walmart's US e-commerce sales rose 69% – a huge number, but the slowest growth rate since the global health crisis began. Revenue from the same store in the United States increased 8.6%, above the 5.8% increase expected by a StreetAccount survey. Subsidiary Sam & # 39; s Club also saw low single-digit sales growth in the same store, excluding fuel and tobacco.

For the three months ended January 31, Walmart posted a loss of $ 2.09 billion, or 74 cents per share, compared to earnings of $ 4.14 billion, or $ 1.45 last year. The company announced that a loss in the UK and Japan reduced earnings by $ 2.66 per share, which was partially offset by 49 cents per share of earnings from stock investments.

Without these and other items, Walmart made $ 1.39 per share due to a lack of analyst estimates. Analysts polled by Refinitiv had expected Walmart to make $ 1.46 per share, excluding the impact of UK taxes.

Total revenue increased 7.3% to $ 152.1 billion from $ 141.67 billion last year Wall Street's expectations of $ 148.30 billion.

Sam & # 39; s Club reported that sales in the same store excluding fuel and tobacco increased 8.5% while ecommerce sales increased 42%.

Biggs told CNBC that the company could get another boost if the government approves a new round of stimulus payments.

"When the money hits, spending is going up pretty quickly and I would expect we to see something similar if we get another round of incentives that is obviously being discussed," he said.

Sales growth in e-commerce is slowing

The slowing pace of the e-commerce growth rate suggests some challenges that tailwinds will face due to global trends in the health crisis. More and more Americans are getting Covid vaccines and are able to spend their budget in other ways, e.g. B. going out for dinner or filling up the gas tank on the way back to the office.

Walmart is also under pressure to turn thriving parts of its business into money makers. Online services that have grown in popularity, such as roadside collection, require additional manpower when employees collect and package orders. This translates into higher labor costs that Walmart has not passed on to its customers, even if more benefit from the convenience of online shopping.

Walmart's e-commerce business has grown dramatically but is still not making a profit. However, according to Biggs, ecommerce margins continue to improve.

Walmart increases its dividend by one cent to 55 cents per share and approves a $ 20 billion share buyback program.

Read the full press release here.

– CNBC's Courtney Reagan contributed to this report.

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Katherine Clark