Walmart suffers disappointing Christmas hit to results


American retail giant Walmart did not have a merry Christmas as disappointing toy and clothing sales hit the chain’s bottom line, the company announced Tuesday.

Massive social unrest in Chile also undermined earnings, but the company has not yet been able to estimate the financial impact of the new coronavirus epidemic in China, where it has a large supply chain. 

In Chile, “unrest led to disruption in the majority of our stores which… negatively affected operating income by approximately $110 million,” the company said, adding that it “continues to monitor the events” in the South American nation.

Walmart said it also is watching the coronavirus outbreak and “has not included any potential financial effects in its assumptions.”

Apple cast a shadow over markets on Monday after announcing it would not reach its sales target for the quarter due to the virus outbreak, which has shut down many key manufacturing and transportation links in China.

Walmart, which has 11,500 stores located in 27 countries, took advantage of the US trade war to re-organize its supply chain so as not to depend too much on a single country or geographic area. 

But the retailer, which is a staple for low-income households, saw sales slow in the fourth quarter ended January 31.

With the consumer instrumental in sustaining US economic growth, the lackluster Walmart results will be a source of concern to analysts and policymakers.

But investors on Wall Street did not seem overly concerned, as shares in the retailer gained 0.5 percent to $118.35 about 30 minutes into the trading day.

“Although Walmart’s growth rate softened in the final quarter, the results are nonetheless respectable and reflect a proposition that remains relevant to consumers,” Neil Saunders of GlobalData Retail said in an analysis.

But he said the company “was not firing on all cylinders during the last part of the year.”

The retailer has made some key personnel decisions, replacing the heads of Walmart US and buy-in bulk outlet Sam’s Club while the head of e-commerce, Andy Dunn, left the company.

– Mild winter impact? –

Global revenue increased 2.1 percent to $141.7 billion, below expectations for $142.5 billion. 

Comparable store sales in the US market, a key indicator for retailers, rose 1.9 percent, well below the gain analysts had projected and far slower than the 3.2 jump in the prior three months.

Revenue generated from the growing online sales component rose 35 percent, but that was also far slower than the 41 percent in the third quarter, despite several promotional operations, such as “Cyber Monday.”

Walmart, which also operates the Sam’s Club wholesale stores, is fighting to catch up with e-commerce behemoth Amazon.

While the quarter started strong, “In the few weeks before Christmas, we experienced some softness in a few general merchandise categories in our US stores,” Walmart Chief Financial Officer Brett Biggs said in a statement.

“We understand the factors that affected our results and are developing plans to address them.”

The company pointed to softer apparel, toy and game sales and noted “a lack of newness in gaming” as a factor.

Some analysts already had warned that mild winter weather in the US could have negative consequences for retailers, as was the case for Target, the main rival of Walmart.

Even with the disappointing results, Walmart posted a 12.3 percent gain in net income to $4.1 billion.

Earnings per share of $1.38 compared to the expected $1.43. For the coming year, it expects to achieve $5 to $5.15 a share.

The company also boosted its dividend to investors by four cents to $2.16 a share.