What’s happening: Walmart is scheduled to report its fourth-quarter results before the opening bell on Tuesday, February 18. The retail giant has been seeing growing losses in its ecommerce business and investors are keen to know how this has impacted bottom-line in the all-important fourth quarter.
What happened: Walmart has beaten the consensus earnings estimates every quarter for the past seven quarters. However, the company has missed revenue expectations twice in the previous three quarters.
The fourth quarter is the most important for retailers, as the holiday season can be responsible for as much as 30% of their annual sales. Walmart’s shares have, however, been under pressure in recent months, as the holiday season in 2019 was six days shorter. Rival Target has just disappointed investors with weak holiday sales and a lowered sales outlook. Moreover, there’s growing concern over Walmart’s ecommerce business achieving profitability.
- The consensus revenue estimate stands at $141.67 billion, representing 2.1% year-on-year growth.
- The earnings estimate is $1.44 per share, a 2.1% rise versus the same quarter in the previous year.
- Same-store sales are expected to have grown 2.8% in the fourth quarter.
Why it matters: Over the past three months, there have been downward revisions in Walmart’s revenue and earnings estimates. The shorter holiday season last year is expected to have hurt overall sales.
While Walmart has seen its online sales grow, especially in its grocery business, the retailer’s ecommerce losses have been growing too. This is because Walmart has been investing heavily in remodelling its ecommerce business to give strong competition to Amazon. The Arkansas-based retailer expanded its omnichannel capabilities by establishing partnerships with Tencent and JD.com as well as investments in last mile delivery capabilities across international markets.
Walmart had reported a 41% growth in ecommerce sales in the US for the third quarter. However, this business has continued to be a drag on the company’s profits.
Walmart had announced in December that it was testing an autonomous grocery delivery pilot program with robotics company Nuro. The retailer aims to improve its offerings with technologies such as artificial intelligence and autonomous delivery, which it believes would gain strong momentum over the next five years.
Recent stock performance: Walmart’s shares have declined by 2.7% over the last three months, although the stock has gained 19.2% over the past year. This is higher than the Dow Jones index, which has climbed 15.7% in the same period. So, despite the current weakness, the shares are trading at elevated levels and could experience further pressure if the company is unable to contain losses in its ecommerce business.
What to watch: The market will watch the Dow Jones and S&P 500, where Walmart is a major constituent. During the earnings call, investor focus will be on the retailer’s recent initiatives in store remodelling and new offerings like in-store pickup and home delivery. Investors will also be keen to know whether Walmart’s ecommerce losses have peaked or are continued to grow. The company is also expected to discuss the coronavirus impact on its business and initiatives in place to tackle the issue.