Walmart posts record fiscal year revenue of $572.8 billion; net income up 1.2%

All engines are firing at Walmart as the Bentonville-based retailer reported net income for the holiday quarter of $3.562 billion, or $1.28 per share, well ahead of the 74-cent loss per share in the fourth quarter of last year. Adjusted earnings of $1.53 per share beat the consensus estimate of $1.48.

Revenue rose to $152.9 billion for the quarter, up fractionally after factoring in $100 million in foreign currency impact. Revenue was also negatively impacted by $10.2 billion from the sale of businesses in Japan and the United Kingdom.

For the full-year ending Feb. 1, Walmart’s revenue was $572.8 billion, up 2.4%, negatively affected by $32.7 billion related to the divestitures. Net income totaled $13.673 billion, up 1.2% compared with the prior fiscal year. Earnings per share of $4.87 per share were better than the $4.75 per share in the prior fiscal year.

“We had another strong quarter to finish off a strong year. We have momentum in our business in all three business segments. We are being aggressive with our plans and executing on our strategy. It’s exciting to see how the teams are simultaneously navigating today’s challenges and reshaping our business,” CEO Doug McMillion noted in prepared remarks.

WALMART U.S.
McMillon said Walmart U.S. had a record fourth quarter with revenue of $105.3 billion, up 5.7% from $99.6 billion a year ago. For the year, revenue was $393.2 billion, up 6.3% from the comparable period. Comp sales were up 5.6% with transactions up 3.1% and an average ticket increase of 2.4% behind an e-commerce contribution of 0.8% in the fourth quarter. Walmart U.S. maintained full-year comp sales of 6.4%, which was in line with analyst expectations.

Walmart Connect, the retailer’s advertising agency, has grown into a $2.1 billion business and McMillon said there is more growth opportunity in the coming months. The same is true for the Go Local final-mile delivery business Walmart launched last year. McMillon said the company has signed on 1,000 pickup locations and that is expected to grow to 5,000 by the end of the year.

The company’s expanding health business also returned the highest gross margin results in the overall U.S. business for the recent quarter, according to Walmart U.S. CEO John Furner. He said Walmart is also in an enviable position with the ability to serve customers, maintain and expand price gaps and also deliver on the company’s financial goals of 4% revenue growth this fiscal year, with comp sales growth of 3%.

Walmart stopped short of giving membership data on Walmart+. McMillon did say order deliveries were up 6% in the fourth quarter and that is one of the benefits of the Walmart+ membership. Furner said Walmart+ is allowing the retailer to gain deeper insights and strengthen customer relationships.

Executives also addressed potential risks to the business in the coming year. The biggest concern from analysts was how Walmart plans to lap the federal stimulus-fueled growth of last year and manage rising costs of goods. McMillon said Walmart deals with inflation around the world nearly all the time which is helpful. Furner said Walmart has more price rollbacks than in prior quarters and price gaps with competitors are constantly monitored. He said Walmart has grown its price gaps in recent weeks and there is room for more rollbacks in key categories like electronics and dry grocery.

Furner also talked about in-stocks and ongoing supply chain challenges. He said stores saw in-stock improvements prior to the holiday with seasonal and apparel each selling well. Fourth-quarter inventory rose 25.7% from the prior-year period. He said Omicron took a toll on in-stocks in early January, but most categories are starting to recover.

Another big cost to the business in the fourth quarter was $400 million in COVID-leave expenses, significantly more compared with $600 million of COVID-leave expenditures Walmart had in the first three-quarter of the year. Walmart expects COVID costs to abate this year, but labor costs will likely be higher.

STRONGER SAM’S
Sales revenue at Sam’s Club for the quarter was $19.2 billion, up 16.5% from a year ago. Comp sales were 10.4% with transactions up 7% and average ticket rising 3.2%. E-commerce sales rose 21% and contributed 1% to the overall comp total in the quarter. Membership income grew 9.1% in the quarter reaching an all-time high total member count.

Sam’s reported strength across most categories, led by food. Consumables like home care and pet and baby care also reported high-single-digit comps in the quarter. Cold food categories saw comps above 10% in the quarter, while dry grocery, drinks and snacks reported comps around 15% in the period as did apparel, tires, and jewelry.

For the year, Sam’s Club had total revenue of $73.6 billion, up 15.1% from the comparable period. Comp sales were 9.8% for the year, and membership income rose 11.3%. E-commerce sales rose 21% with strong contributions from direct-to-home and curbside pickup.

SHRINKING INTERNATIONAL
Walmart continues to shrink its global footprint to focus on India, China, Mexico and Canada. Revenue totaled $27 billion, down 22.5% because of divestitures and currency exchange rates. On a constant-currency basis, sales would have increased 9.1%. Inventory rose 26% across the international segment. during the fourth quarter.

McMillon reported strong growth with Sam’s Club in China, along with solid contributions from Mexico and Flipkart in India. E-commerce sales accounted for 21% of total international sales in the quarter. Walmex net comp sales rose 8.3% propelling total revenue growth of 9.5% in the quarter. Mexico reported e-commerce sales growth of 15%, up 186% on a two-year stack. China saw 26.7% sales growth, with comp sales rising 19.8% in the period. E-commerce sales rose 93% in the quarter and were up 158% on a two-year stack. Canada saw modest sales growth of 3.9% with comp sales rising 4.6% from a year ago. E-commerce net sales declined 4% against strong growth last year of 226%.

For the year, Walmart’s international sales totaled $101 billion, down 16.8% from the prior year when the company had businesses in Japan and the United Kingdom.

THE OUTLOOK
Walmart continues to generate robust operating cash flow totaling $24.2 billion in the fiscal year which allowed for $9.8 billion in share purchases and dividends totaling $6.2 billion.

Walmart is forecasting net sales growth of 4% this year, excluding divestitures. U.S. comp sales are expected to be at least 3% and capital expenditures are pegged at roughly 3% of net sales with a continued focus on supply chain, automation, customer-facing initiatives and technology.

“The results in the quarter were solid and the guidance speaks to Walmart’s ability to manage through a challenging supply chain environment and demonstrates its relatively advantaged positioning in the market. We think the guidance clears the bar. We reiterate our overweight (buy) rating and price targets are under review,” said Stephens Analyst Ben Bienvenu (Stephens Inc. conducts investment backing services for Walmart and is compensated accordingly.)

Bienvenu said gross margin was better than expected at 23.8% and expenses were also a bit higher than forecast due in part to more-than-expected COVID-leave costs incurred in the quarter.

Shares of Walmart (NYSE: WMT) fell more than 2% to $136.33 on active trading in the morning session. For the past 52 weeks, the share price has ranged between $126.28 to $152.57. Year-to-date the share price is down 5.84%.