Walmart forecasts disappointing full-year sales as lockdowns ease; shares fall

REUTERS: Walmart Inc expects full-year sales and profit growth to slow as it reinvests in its business and lockdowns end, after revenue soared to US$560 billion last year as people stocked up on groceries during the pandemic.

Shares in Bentonville, Arkansas-based Walmart were down 4.7per cent in early trading on Thursday. The company has invested heavily in online, advertising and healthcare businesses over the past year, using pandemic-led sales momentum to diversify beyond brick-and-mortar retail.

"Guidance was muted, locking in gains from last year but stalling profit expansion in favor of critical investments in people and platform," Jefferies analyst Stephanie Wissink said.

Walmart forecast adjusted net sales to grow in the low single digits in fiscal 2022 which ends Jan. 31, much lower than the 8.5per cent growth seen in the preceding year. It also expects earnings per share to be flat-to-slightly up, below the 2.2per cent growth analysts had been expecting, according to Refinitiv.

"We're going to invest more aggressively in capacity and automation to position ourselves to earn the primary destination with customers, we are absolutely playing offence here," Chief Executive Doug McMillon said at Walmart's investor day conference.

Walmart expects capital expenditure to increase 27per cent to about US$14 billion this year, focusing on key areas like supply chain and automation.

RARE PROFIT MISS

The world's biggest retailer missed expectations for fourth-quarter profit as it took on about US$1.1 billion in pandemic-related costs during the quarter, including higher wages for warehouse workers, bonuses for store employees and costs related to keeping its stores clean.

The company, which employs 1.5 million people in the United States, also said it was raising wages to more than US$15 per hour on average.

An early start to the holiday season and a boost from stimulus money late in the fourth quarter drove demand for electronics, toys and groceries.

Sales at U.S. stores open at least a year surged 8.6per cent, excluding fuel, in the three months ended Jan. 31, well above analysts' expectations for a 5.6per cent rise, according to IBES data from Refinitiv.

“The guidance that we're going to give this morning really doesn't include any material stimulus because we just don't know what will happen. If we get more stimulus certainly that's a tailwind for us," Chief Financial Officer Brett Biggs told Reuters in an interview.

Online sales rose 69per cent in the quarter, blowing past a 35per cent increase in the year-earlier period, but slower than a 79per cent surge in the third quarter.

The retailer has relied on its scale and strengthening online presence during the pandemic to attract new customers looking for a one-stop shop for their daily needs.

Operating income rose 3.1per cent to US$5.49 billion in the quarter, while adjusted earnings were US$1.39 per share. Analysts on average were expecting the company to earn US$1.51 per share.

(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Bernadette Baum and Nick Zieminski)