Wal-Mart Tumbles After Missing Earnings, Guidance Disappoints, Online Sales Slow

Walmart reported Q4 non-GAAP EPS of $1.33 (GAAP $0.73), missing consensus est. of $1.37 if more than $1.22 a year ago, largely thanks to the company's plunging tax rate (Q4 at 21.6%, down 9.2%) on revenue of $136.3BN, also above the est. of $134.83BN, and up 4.1% from the $130.9BN a year earlier (the number includes $1.12BN from membership and other income, down 5.8% y/y). For the full fiscal year 2018, total revenue was $500.3 billion, an increase of $14.5 billion, or 3.0%.

More disappointing was Walmart's Q4 gross profit, which declined 61bps to 24.1%, even as the company's effective tax rate tumbled 917bps to 20.3%.  Furthermore, gross merchandise volume (a measure of all the goods it sells online) rose 24% in 4Q vs 54% in 3Q;

Also disappointing was Walmart slower Q4 eCommerce sales, which rose only 23% in Q4, down from an average of 50% in the last three quarters. Walmart has been aggressively investing in its eCommerce business to catch up with Amazon, and the efforts had generally paid off until the current slowdown, even if online shopping still makes up only about 4% of the company’s nearly $500bn in annual sales. Looking ahead, the company hopes that eCommerce sales growth will revert back to "approximately 40%."

But the biggest disappointment to investors is that despite reporting stronger than expected US comp sales of 2.6%, beating expectations of 2.0%, Walmart guided full year 2019 EPS of $4.75-$5.00, well below the consensus estimate of $5.13.

Some more details on the fourth quarter ended Jan 31:

  • Walmart U.S. comps. ex-fuel up 2.6%, est. up 2.0%; forecast up 1.5%-2.0%
    • Wal-Mart U.S. traffic up 1.6% y/y, avg ticket up 1.0%
    • Wal-Mart U.S. E-commerce sales up 23% y/y, GMV up 24%
  • Sam’s Club comps. ex-fuel up 2.4%, est. up 1.9% (CM, avg of 19); co. saw up 1.5%-2%
  • Sam’s Club traffic up 4.3%, avg ticket down -1.9%

Commenting on the results, WMT CEO Doug McMillon said that "we have good momentum in the business with solid sales growth across Walmart U.S., Sam's Club and International. We're making real progress putting our unique assets to work to serve customers in all the ways they want to shop, and I want to thank our associates for their great work this past year. We're making decisions to position the business for success and investing to win with customers and shareholders."

But what investors were far more focused on was Walmart's poor guidance, which as noted above, saw full year adj. EPS $4.75-$5.00 (reflects effective tax rate 24%-26%, excluding benefit of ~5c from currency), versus a Wall Street est. of $5.13. The company also sees FY19 Walmart US comp. sales growth ex-fuel of at least 2%, Sam’s Club (ex-fuel & tobacco) up 3%-4%.

Other guidance details:

  • Expect to slightly leverage expenses on a consolidated basis
  • Consolidated operating margin (% of sales): approximately 4.3% - 4.4% in constant currency
  • Capital expenditures: approximately $11.0 billion
  • Effective tax rate: between 24% and 26%

Walmart also sees year net sales growth in constant currency of 1.5%-2.0%, hurt by:

  • Sam’s Club closures, decision to remove tobacco from certain clubs
  • Decision to wind down first-party eCommerce business in Brazil, divestiture of Suburbia

Another major red flag was that Walmart uncharacteristically did not provide 1Q comp. sales targets.

In light of the poor guidance, despite the sharp tax rate drop, the market was not happy, and send WMT stock over 6% lower in premarket trading.

Finally, the WMT weakness has spilled over into Target, which is also indicated lower at after Walmart forecast year adjusted EPS below estimates and did not provide 1Q comp. sales targets. Also, in another hit to Target, AMZN earlier announced that Amazon Rewards Visa Cardmembers will now get 5% back on all Amazon.com purchases (equal to TGT’s REDCard reward), 2% back at restaurants, gas stations and drugstores, and 1% back on all other purchases.

Source: WMT


The best Sun BandGap Tue, 02/20/2018 - 09:06 Permalink

No criminal record?

Member of a pistol/rifle club?

A safe to keep them in?

Apply for a license and

go crazy dude!

I personally own two Baby Eagle 9 mm pistols,

one steel, one polymer,

a Tanfoglio Stock 3 in 9mm 

and a S&W 686 with 6" barrel.

No problems.

More guns now than before the gun buy back.

Just no semi-auto rifles.

So no AR-15's or AK's etc. Which is a pity.

I have not fired an auto/semi-auto rifle since my military days.

Did you know police commit crimes at 5 x the rate licensed gun owners do?



In reply to by BandGap

BandGap The best Sun Tue, 02/20/2018 - 09:55 Permalink

Thank you for the info. I learned something today, including the disturbing news about the Australian police force. Interesting to see people exploiting the trust of the masses.

I just shot a squirrel attempting to destroy my bird feeder. Here in the states (and flyover country) it is not uncommon to hear gunfire at any time during the day. Plenty of family with farms to sight out rifles here.

I have a Taurus .38 police special and a Taurus .357 magnum as my only revolvers. Everything else is semi auto, including my wife's two pistols. Plenty of ammo.

In reply to by The best Sun

I woke up Tue, 02/20/2018 - 07:59 Permalink

They need to change the name of the online stores to something else, Walmart is synonymous with low end retail that caters to the low income market, if they want a wider audience they need to disassociate from that name even though it served them well.

wally_12 Tue, 02/20/2018 - 08:14 Permalink

How can their revenue increase when they only stock the stores once a month and try to foist their own brands instead of providing popular brands. Also, There are no check out clerks. You have to check out yourself and machines breakdown while you are waiting for clerk to clear machine. I was shocked to learn they have 400 employees in local store. I guess that is why they can afford to let them BS out in the parking lot. I usually see 4-5 employees smoking and BS'ing in lot. Wouldn't want to use them for check out. There is a hilarious web site for "Customers of Wal-Mart" I think it my local.

Sonny Brakes Tue, 02/20/2018 - 08:30 Permalink

You know the Walmart's (The Great Wall Mart of China) vendors are going to be asked to cut their costs and their vendors will reformulate their products and pass those costs onto the consumer.

NoWayJose Tue, 02/20/2018 - 08:34 Permalink

Online site is horrible (as bad as Sears).

Walmart raised store prices so these numbers are much worse than expected.  When Target and my two local grocery stores keep beating Walmart prices - their ‘model’ is broken.

They jack up prices the last day of every month - to prepare for the flood of EBT and SS buyers.  I avoid them for that week for anything.

Phillyguy Tue, 02/20/2018 - 08:44 Permalink

We are witnessing the end result of decades of policies designed to enrich the wealthiest segments of US society (Trump, HRC and their wealthy supporters) at the expense of working people. This has included multiple tax cuts for the wealthy, job out-sourcing, financial deregulation, coupled with spending astronomical amounts of money on the military and disastrous wars in Afghanistan (longest running war in US history), Iraq, Libya, Syria and Yemen. Future wars against DPRK, Iran, China and Russia are in advanced planning stages. Further, the entire economic “recovery” since 2008 is completely bogus. As David Stockman points out, there has been NO increase in industrial production, which remains 2% below 2007. Since the 2008 financial collapse, the stock market has been juiced by an infusion of $ trillions of ultra-cheap money from the FED for share buybacks and MA deals. In addition any time the market drops, as it did 2 weeks ago, the FED (aka “plunge protection team”) rushes in to buy stock futures to push markets back up. The end result has been continuing decline of the purchasing power of the average working American, the demographic that shops at WalMart. Expect this pattern to continue as the financial vise continues to tighten. Working people are facing a very bleak economic future.

The last time I checked, no one has developed an economic perpetual motion machine, whereby a country survives by issuing debt and printing money.

3-fingered_chemist Tue, 02/20/2018 - 09:24 Permalink

Only thing I will buy at Wal-Mart is motor oil. They carry all the quality brands and have the best prices. Usually wait for the oil manufacturers to have their semi-annual/annual rebate promotions on purchasing their oil and then you can get "full synthetic" Pennzoil, Quaker State, Castrol, or Mobil 1 for less than 15 dollars for 5 quarts. 

Other than that, I don't see how Wal-Mart has the best prices for much of anything. The local Kroger has better deals but then you have to know how to do math and read a weekly ad. That pretty much eliminates about 90 % of the population.

wishDr. Tue, 02/20/2018 - 09:32 Permalink

I buy 1 (ok 2) items @ the walmarts - dog food & 2 tins of soft cat food my animals enjoy. years it's been 8.62$ until this last trip - OVER TEN BUCKS! wtf. anyhow, that was the last time because now everyone else is cheaper. I like walmarts for the low knuckle dragging clientele watching, it's fantastic.