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Dive Brief:
- Walmart on Tuesday reported comparable sales were up 8.3% and e-commerce sales grew 17% in the U.S. in the fourth quarter. Total global revenue for the quarter was up 7.3% to $164 billion, while revenue for the full year rose 6.7% to $611.3 billion.
- The company said its Q4 consolidated operating income was $5.6 billion, a decrease of 5.5%, while Q4 adjusted operating income was $6.4 billion, an increase of 6.9%. Gross profit rate declined 83 basis points, due to markdowns and mix of sales.
- For 2023, Walmart expects consolidated net sales to increase between 2.5% and 3%, and for U.S. comp sales to increase between 2% and 2.5%.
Dive Insight:
Walmart pushed through inflation and supply chain-related challenges in the fourth quarter, retaining its leading financial position as one of America’s top retailers.In a statement, CEO Doug McMillon praised the company's quick response to inventory and cost challenges last year.
“For fiscal ‘23, we added $38 billion in sales globally and we crossed $600 billion in revenue for the first time in our company’s history. Globally, e-commerce now represents more than $80 billion in sales and over 13% of our total sales,” and Walmart U.S. grew sales by more than $27 billion, McMillon said on a Tuesday morning earnings call.
Analyst Neil Saunders of GlobalData said in emailed comments that “Walmart has ended its year with a powerful set of numbers that show despite economic and competitive pressure, it remains the leader of the pack in retail.”At the same time, Saunders noted, “a lot of Walmart’s solid results are a consequence of inflation – especially in grocery and consumables where comparable sales are up in the mid-teens range. This has proved something of a double-edged sword as, while it flatters revenue numbers, it is less helpful to the bottom line where operating profit declined by 5.5% overall and grew by a relatively modest 3.8% in the US.”
The company also offered guarded guidance for 2023. Chief Financial Officer John David Raineysaid during the call Walmart expects operating income growth to outpace sales growth. However, “given the persistence of high prices and the potential for further macro pressures, we are taking a cautious outlook for the year.”
Saunders said Walmart can cope with inflationary pressures better than other retailers due to the company’s enormous buying power. “It is also benefitting from an influx of new customers, including those at the higher end of the income spectrum, who are seeking lower prices and strong value for money,” he said. Those attributes set Walmart apart from its rivals.
Rainey said Walmart’s comp sales were strong in Q4 “and December was the largest sales month in Walmart US history.” That was led by strong performance in food sales which increased in the high teens offset by a mid-single-digit decline in general merchandise sales. Rainey said there was softness in toys, electronics, home and apparel.
“The effects of product mix shifts have negatively impacted our margins,” Rainey said. “Over the last year, grocery and health and wellness sales, which have a lower margin than general merchandise, have increased by 330 basis points as a portion of our mix.”
Rainey also said Walmart continues to see strong share gains in the grocery segment with nearly half of those gains coming from higher-income households. In addition, over the last two years, Rainey said store-fulfilled delivery sales “nearly tripled” to over $1 billion monthly.
But Walmart won’t be able to rely on food inflation as a long-term or ongoing sales driver, according to Saunders.
“The problem with Walmart in general merchandise is that it acts and thinks like a grocery player – merchandising in a very functional fashion with little to no flair. This is not enticing or appealing to many shoppers and makes assortments seem uninteresting, which reduces conversion and purchasing rates,” Saunders said.
He said the company recognizes this issue and in response, is remodeling stores and should focus on elevating visual merchandising, which in turn, can encourage shoppers to browse longer, which can then drive up sales.
“This may be difficult to justify in the present sluggish environment, but we also see it as a critical element of long-term success – including attracting more younger shoppers,” Saunders said.
FAQs
The retail industry is changing rapidly, and Walmart sellers are facing a number of new challenges in 2023. These challenges include rising fees, increased competition, and a crackdown on counterfeit products.
How is Walmart dealing with inflation? ›
Consumer spending accounts for roughly two-thirds of U.S. economic activity. Walmart has used its clout to work with suppliers to manage inflation. CEO Doug McMillon told industry analysts Tuesday that general merchandise prices are lower than a year ago and even two years ago in some categories.
What are the current problem Walmart is facing? ›
Walmart encounters several problems that include stiff competition, a negative reputation, constraints in business acquisitions and joint ventures, and stringent cultural values in foreign markets (Kneer 25). There is stiff competition from other retail stores that have adopted a low-price strategy.
Is Walmart having financial problems? ›
Walmart got a lift from higher spending on its digital advertising platform, too. But it's hard not to be disappointed with the chain's sluggish earnings growth. Operating income is only projected to rise by between 4% and 6% this year to just slightly outpace the expected sales growth range of 3% to 4%.
What is Walmart's biggest issue? ›
Allegations of predatory pricing and supplier issues
Walmart has been accused of selling merchandise at such low costs that competitors have tried to sue for predatory pricing (intentionally selling a product at low cost in order to drive competitors out of the market). In 1995, in the case of Walmart Stores, Inc. v.
Is Walmart in financial trouble 2023? ›
Walmart stock is now a bit behind, up 10% so far in 2023. Investors should see the current discount as another reason to like this dominant retailer. Walmart is heading into the holiday period with caution around consumer-spending patterns, sure. But customer traffic is strong, and profit margins are rising.
What is the Walmart inflation lawsuit? ›
The class action lawsuit, first filed in October 2022, alleges that Walmart shoppers across the U.S. and Puerto Rico who purchased certain sold-by-weight meat and seafood as well as select citrus sold in bulk bags paid more than the lowest price advertised in stores.
Is Walmart overcharging customers? ›
Walmart, a global retail giant, recently settled a class-action lawsuit filed in Florida, alleging overcharging customers. Walmart customers who made purchases of weighted goods or bagged citrus between October 2018 and January 2024 may be entitled to compensation as part of a class-action lawsuit settlement.
Is Walmart going back to pre inflation prices? ›
Eggs, apples, and deli snacks will now cost significantly less. Karla is a lifestyle journalist with more than 20 years of experience in food, drink and travel coverage.
What are the key strategic issues facing Walmart in the future? ›
The major issue that that Walmart will be facing in the future lies in its ability to remain competitive with Amazon. Amazon made a direct move into the retail grocery business with its acquisition of Whole Foods, and Walmart is already at a disadvantage against Amazon on the ecommerce market.
Wal-Mart was criticized for providing low wages and inadequate health care benefits, driving small merchants out of business, damaging the culture in small towns, harming the environment, and violating workers rights.
What are Walmart's biggest weaknesses? ›
Walmart's Weaknesses – Internal Strategic Factors
Low wages, inadequate healthcare, and poor working conditions are few of the issues that have been publically criticized. Large span of control – Its highly extended size and massive span of control could leave Walmart weak in some areas.
Why are so many Walmart's closing? ›
Since things are more expensive for just about everyone, it's no surprise that even budget-friendly retailers like Walmart (WMT) are seeing an impact. The retail giant closed approximately 24 stores in 2023 due to a mix of factors, including lower-than-expected performance, inventory shrink, and economic downturn.
Is Walmart closing stores in 2024 USA? ›
Walmart. Six Walmart stores have closed so far in 2024, according to reports – including a pair of stores in California and one in Maryland. One Walmart location closed in Ohio and another pair of stores closed in San Diego that the company said did not meet financial performance expectations.
Is Walmart in a strong or weak financial position? ›
In summary, Walmart has a more consistent financial performance than Amazon, with steadier profitability despite Amazon having a stronger cash flow position in 2023, but also has a higher debt load.
Why is Walmart closing stores in 2023? ›
“We have nearly 5,000 stores across the U.S. and unfortunately some do not meet our financial expectations.” Walmart closed 24 underperforming stores across 14 states and Washington, D.C. in 2023, including two in Georgia, two in Oregon and eight in Illinois.
What is the Walmart guidance for 2023? ›
Fiscal Year 2023
The company raises full-year outlook to reflect third quarter performance: Consolidated net sales growth of about 5.5%. Excluding divestitures1, consolidated net sales growth of about 6.5%. Based on current exchange rates, the company expects a headwind of about $4.1 billion for the year.
