Walmart Earnings: Going Small to Seek Growth

Walmart booked one-time charges in the fourth quarter that resulted in a $0.26 per share hit to earnings. On a GAAP basis, the company’s EPS were $1.34. Walmart had warned on earnings in late January, and the final results came in at the lower levels that the company announced.

For the full year, Walmart reported EPS of $5.11 on revenues of $476.29 billion, compared with year-ago EPS of $5.02 on revenues of $468.65 billion. GAAP EPS totaled $4.85. The consensus estimates called for EPS of $5.11 on revenues of $476.83 billion.

For the first quarter of its 2015 fiscal year, Walmart forecast EPS in a range of $1.10 to $1.20, and for the full year the company expects to post EPS in the range of $5.10 to $5.45. Walmart also pulled back from its October estimate for an increase of 3% to 5% in net sales. Now the store believes it will be “toward the low end” of that range.

U.S. fourth-quarter same-store sales were down 0.4%, while same-store sales in the company’s Neighborhood Market stores rose 5% in the quarter. Walmart expects same-store sales to be flat in the first quarter.

Walmart’s new president and CEO, Doug McMillon, said:

[Same-store] sales improvement is a key priority, and we’ll focus on being even stronger item and category merchants, delivering value and improving our service levels. … We’ll invest aggressively in e-commerce and increase our small store rollout in the U.S., as we’ve done in several other countries, to deliver value and convenience. Today, we are announcing an increased capital allocation, above our previous forecast, to accelerate small store growth in the U.S. The combination of supercenters and smaller formats closer to customers’ homes, along with e-commerce and mobile commerce, will enable us to increase our relevance for the Walmart brand around the world.

The company plans to increase its U.S. capital spending in the new fiscal year from a previous estimate for a range of $5.8 billion to $6.3 billion to a new range of $6.4 billion to $6.9 billion. The increase will support the opening of another 270 to 300 small-format stores, Neighborhood Markets or Walmart Express stores, more than double the October guidance.

Walmart shares were down about 1.1% in premarket trading Thursday, at $74.50 in a 52-week range of $69.72 to $81.37. Thomson Reuters had a consensus analyst price target of around $82.30 before these results were announced.