Walmart sales crack US$500 billion

Walmart sales reached US$500.3 billion last year, an increase of $14.5 billion, or 3 per cent.

But that failed to excite shareholders, with the share price shedding 10 per cent of its value immediately after the announcement.

Arguably, the world’s largest retailer’s biggest success last year was its e-commerce business where it is looking to take market share away from Amazon – just as Amazon is trying to encroach on the brick-and-mortar space in the US.

E–commerce sales rose 44 per cent for the full year, although growth slowed from 50 per cent to 23 per cent in the last quarter, partly due to the annualisation of its year-old acquisition. It forecasts 40 per cent growth in the current quarter.

Neil Saunders, MD of GlobalData Retail, says Walmart has more work to do to widen its e-commerce customer base.

“There are many demographics, especially younger and professional segments, for whom Walmart is not the destination of choice online. This isn’t because it doesn’t sell what they want or because the price or delivery options are suboptimal; instead, it is because they do not associate Walmart with online or they default to Amazon. This is a tough nut for Walmart to crack, and one that it can only break by more heavily marketing its services and proposition.”

While figures for the Walmart China business were not broken out, the international division posted 6.7 per cent year-on-year growth in the latest quarter. China and Mexico were the star performers and Walmart’s troubled UK grocery chain Asda showed long-awaited improvement.

Bottom line blues

The weakest part of Walmart’s figures was on the bottom line. Consolidated operating income was $20.4 billion for the year, a decrease of 10.2 per cent, however the company says that when one-off impairments and costs are taken out of the equation, operating income would have been “relatively flat”.

Saunders says there is no cause for alarm over the bottom line performance. “Walmart remains comfortably profitable and much of the deterioration is down to the various investments Walmart is making in future-proofing its business. We applaud this long-term view, especially as it is now being coupled with some rationalisation and streamlining initiatives.”

Meanwhile, a solid US market performance reflects higher customer traffic and higher average spend.

“Part of this is down to a more optimistic and carefree consumer, who was in a mood to spend over the holidays.

Arguably those shoppers did not have to visit Walmart – but many did, and from our data, Walmart increased its share of shoppers over the final quarter. We believe this is down to Walmart’s focus on low prices plus better customer service, improved ranges, and better-selling environments. The bottom line is that even in an era of stiff competition, Walmart is becoming more and not less relevant to the American consumer,” said Saunders.

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