Grocery, Omnichannel Drive Walmart Q4 Gains

Food sales momentum at nine-year high; online profitability challenges remain stubborn
Photograph courtesy of Walmart

Strong sales in grocery, aided by expanded pickup and delivery options and a boost related to an early disbursement of federal food assistance benefits, drove a robust fiscal fourth quarter for Walmart, the retailer said.

U.S. grocery comps for the period ending Jan. 25 were in the mid-single digits, helping Walmart drive nonfuel U.S. comps of 4.2%, with traffic up 0.9% and average ticket jumping by 3.3%. E-commerce contributed approximately 180 basis points to segment comp sales growth, and the early release of SNAP benefits related to the government shutdown added 40 basis points to the U.S. comp figure.

On a two-year stack basis, U.S. grocery comps are the strongest in nine years at Walmart, CEO Doug McMillon said in a conference call with analysts.

U.S. sales in the quarter increased by 4.6% to $90.5 billion and by 4.1% to $331.7 billion for the fiscal year. U.S. operating income of $5 billion was up by 7.3% for the quarter and increased by 2.3% in the fiscal year to $17.4 billion.

Those figures came as profits continued to show the strains of expanding e-commerce and price pressure despite favorable economic conditions such as low unemployment and falling gas prices. McMillon said the company was experiencing some inflation but matching it with “appropriately aggressive” price investment. “We’ve had modest inflation, but our customers are not really seeing it based on what we’re doing,” CFO Brett Biggs added.  

“Progress on initiatives to accelerate growth, along with a favorable economic environment, helped us deliver strong comp sales and gain market share,” McMillion said. “We’re excited about the work we’re doing to reach customers in a more digitally-connected way. Our commitment to the customer is clear: We’ll be there when, where and how they want to shop, and [we'll] deliver new, convenient experiences that are uniquely Walmart.”

McMillon confessed that Walmart’s journey to profitability in e-commerce was taking longer than expected, saying one key was assembling a mix of nonfood items such as apparel, home goods and hard lines that can drive repeat traffic, despite a U.S. online sales increase of 40% in the quarter.

The company reiterated fiscal year guidance first issued in October calling for 2.5% to 3% U.S. comp growth and U.S. e-commerce sales growth of 35%. Companywide operating income is expected to increase slightly, excluding effects of Walmart’s investment in the India e-commerce business Flipkart.


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