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What Went Wrong In Walmart's Success Story?

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What Went Wrong In Walmart's Success Story?

On Thursday, Walmart (NYSE: WMT) posted a record $152 billion in fourth quarter sales, but U.K. tax charges trimmed its bottom line and planned investments resulted in weaker-than-expected fourth-quarter earnings. Along with tepid fiscal-year outlook, shares went down.

Figures

Group revenues rose 7.3% from last year as they amounted to $152.08 billion, exceeding analysts’ estimates of $148.3 billion. U.S. same-store sales rose 8.6% compared to last year, strongly topping Refinitiv’s 5.8% forecast.Although e-commerce sales in the U.S. grew by 69%, this is the slowest growth rate since the global health crisisstarted. If we look at 2020 as a whole year, they rose 79%.

The world’s biggest retailer said adjusted earnings for the three months ended in January came in at $1.39 per share, missing the consensus forecast of $1.50 per share. U.S. shoppers continued to favor big-box retailers over smaller rivals but it wasn’t enough to offset the planned surge in investment costs. Although the pandemic trends were beneficial for the big-box retailer that also benefited from many customers spending their stimulus checks, the pandemic also brought Covid-related expenses of $1.1 billion during the quarter.

Walmart’s success was also the result of investments in its online business long before COVID-19 started its relentless march across the US. Thanks to these efforts, it could provide curbside pickup and speedy delivery in a crucial time.The company’s goal is to turn the e-commerce strength achieved during the health crisis into lasting momentum that will result in higher profits. But in order to do that, Walmart needs to invest in these efforts.

2022

2022 financial year sales are expected to rise by only low single digits, with operating income and earnings to be flat to up slightly as Walmart pledged to lift average employee wages to $15 per hour and boost total capital expenditures to $14 billion, up from a rate of $10 billion to $11 billion, as it invests in supply chain, automation and improvements to the customer experience. Although the bottom-line delivery is disappointing, the company believes the underlying health of the business remains intact and top-line guidance suggests continued momentum.

Novelties ahead

Walmart CEO Doug McMillon revealed the company is retooling its business to better serve customers, tap new revenue streams and create a diverse ecosystem of services. It will not only deliver groceries to people’s fridges, but also include annual health checkups and new financial services. The retailer also plans to step up its advertising and overall game to adjust to the new retail normal the pandemic has created, such as spending on automation to gain in speed and increase the number of orders it can fill.

Outlook

Last month, Walmart lost one of its most important executives as Marc Lore, who is credited for turning it into the nation’s second-largest online retailer behind Amazon (NASDAQ: AMZN) by reviving the e-commerce strategy, announced his retirement. Perhaps it wouldn’t look that scary if this wasn’t the second major departure of an e-commerce executive within a year, as Jamie Iannone left to take on the CEO role at EBay Inc. (NASDAQ: EBAY). There’s no arguing that Walmart benefited from the pandemic and that its efforts paid off, but it remains to be seen if the big box retailer can keep up the momentum without two of its leading men.

This article is not a press release and is contributed by IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure. IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com

 

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