One stock that made some surprising moves on Thursday was Walmart (NYSE: WMT). After what’s been a pretty incredible year for the retailer, the company reported another solid quarter, at least, in terms of revenue growth, during the morning. However, management also warned investors to expect the coming year as being one with less in the way of potential growth opportunities. In addition to that, Walmart also said that it would be raising the wages of over 450,000 employees across the country, which could further hamper the retailers already modest profit margins. In response, Walmart’s stock ended up falling significantly as traders reacted to the news.
Breaking down the actual financial figures, Walmart saw its sales rise by 8.6% during the fourth quarter of 2020. That’s actually even higher than third-quarter results, which were up by around 6.4%. However, Walmart also said to shareholders that it expects to see much slower growth in 2021 and that investors should be prepared for low-single-digit percentage revenue growth going forward.
“We completed a strong year and a strong Q4 thanks to our amazing associates. They stepped up to serve our customers and members exceptionally well during a busy holiday period in the midst of a pandemic,” said CEO Doug McMillon. “The strategy, team and capabilities are in place. We have momentum with customers, and our financial position is strong.”
In terms of actual profits, Walmart ended up falling short of most analysts’ expectations. Earnings per share for the fourth quarter came in at just $1.39 per share, which is a tad shy of the 1.50 that Wall Street was expecting. Couple that with the fact that Walmart is hiking up the average hourly salary of almost 450,000 employees, while good news for workers, profit margins could fall even more for Walmart, something shareholders probably aren’t that happy about.
Like most other retailers, Walmart has stopped provided financial guidance due to the pandemic and the possibility of further lockdowns. While retail sales have definitely struggled, this downturn has been more than mitigated by Walmart’s surging online e-commerce business. At the same time, while the average number of shopping trips has decreased per customer, the average cart size has increased to make up for this.
Shares of Walmart were down around 6.5% on Thursday in response to the news. While Walmart has been one of the best performing large-cap retailers on the market, stock prices have more or less settled over the past few months.
Walmart Company Profile
America’s largest retailer by sales, Walmart operates over 11,300 stores under 58 banners, selling a variety of general merchandise and grocery items. It’s home market accounted for 76% of sales in fiscal 2019, with Mexico and Central America (6%), the United Kingdom (6%), and Canada (4%) its largest external markets. In the United States, around 56% of sales come from grocery, 33% from general merchandise, and 11% from health and wellness items. The company operates several e-commerce properties apart from its eponymous site, including Flipkart, Jet.com, and shoes.com (it also owns a roughly 10% stake in Chinese online retailer JD.com). Combined, e-commerce accounted for about 5% of fiscal 2019 sales. – Warrior Trading News
