Wal-Mart (WMT) Posts Best U.S. Quarter in 4 Years

Wal-Mart (WMT) shares are rising in pre-market trading on Tuesday, up over 3.4% as the largest retailer in the world tops Wall Street fourth-quarter expectations. The company’s U.S. business propelled growth in the final quarter of the year, marking the company’s best quarter since July 2012.

Wal-Mart (WMT)

Wal-Mart (WMT) posted their 10th straight quarter of comparable sales growth. Comparable sales grew by 1.8%, surpassing expectations of 1.3% growth.

The company’s EPS was $1.30, beating expectations of $1.29 earnings per share. Revenue missed the mark, coming in short at $130.94 billion and missing expectations of $131.22 billion. The revenue miss is a result of food deflation and foreign exchange rates.

The retail giant has invested heavily to increase e-commerce sales and revamp their ground stores. An immediate impact on investments is seen, as the company’s total sales rose 1% from $129.67 billion a year prior. Earnings per share during the same period a year prior was $1.49 per share.

Online sales acceleration led to digital sales growth of 29% on the quarter. The company’s acquisition of Jet.com and a focus on online grocery service helped the company boost sales. CEO Doug McMillon stated, “We continue to invest in e-commerce to accelerate growth.”

The company acquired three online retailers in 5 months worth $.12 billion. Jet.com was the company’s largest purchase at $3 billion. In an effort to compete with Amazon (AMZN), Wal-Mart (WMT) introduced free shipping on millions of items when a consumer spends $35 or more.

Amazon Response

 

Amazon (AMZN) quickly responded by lowering their free shipping threshold to $35.

Wal-Mart’s effort to ensure the company offers the lowest prices caused the company’s gross margins to fall. Holiday markdowns also weighed on the company’s gross margins. Sales in 10 of 11 international segments increased despite exchange rates being unfavorable.

The company’s fiscal 2018 earnings per share projections are $4.20 – $4.40.

Tax refund delays are expected to hurt the company’s sales at the start of the year, with reports of slow sales to start the year.