Walmart Inc. (NYSE:WMT) laid out ambitious plans Thursday to grow annual revenue by 4% for years to come with billions of dollars allocated to expanding its e-commerce capabilities. However, Wall Street chose to focus on lighter-than-expected fiscal 2021 fourth-quarter results as well as uninspiring FY 2022 guidance, sending shares down sharply in early trading.
The Bentonville, Arkansas-based company reported record quarterly revenue of $152.1 billion, a 7.3% increase from fiscal 2020 fourth-quarter levels. U.S. sales, excluding revenue from fuel transactions, rose 8.6% to $99.6 billion. U.S. e-commerce sales jumped 69% in the FY 2021 quarter due to seasonal holiday activity and continued online ordering by consumers coping with a resurgent COVID-19 pandemic in the period. The company did not break out e-commerce sales in dollar amounts.
Systemwide adjusted operating income came in at $6.6 billion, slightly higher than the $6.5 billion in adjusted operating income reported in the FY 2020 quarter. Adjusted earnings per share was reported at $1.39, which excluded a $2.66 per-share loss on the sales of Walmart’s business in the U.K. and Japan. Walmart formally exited the U.K. this month and said it plans to exit the Japanese market by the end of April. The losses were partially offset by investment gains in Chinese retailer JD.com (NYSE:JD).
The quarterly EPS numbers were well below the $1.51 per share analysts polled on multiple financial platforms. What’s more, the company’s somewhat limited FY 2022 guidance didn’t thrill investors. Systemside net sales are expected to decline on a constant currency basis, with U.S. sales expected to rise by low single-digit levels. Earnings per share and operating income, both excluding the impact of divestitures, will be flat to up slightly, Walmart forecast. Capital expenditures will be around $14 billion, with supply chain initiatives at the forefront, Walmart said.
As of midday trading Thursday, Walmart shares were down $7.75 a share, a decline of about 5.25%.
Company executives said they plan to effectively remake the 58-year-old company to succeed in a digital retail world that they acknowledge coming late to. The investments today are designed to bear fruit over the next few years, “not the next 12 months,” Doug McMillon, Walmart’s president and CEO, said on the analysts call, which was conducted virtually.
Executives also pointed out that a 4% annualized revenue increase from FY 2021 sales of $559 billion would in itself be equal to the size of many Fortune 100 companies.
Walmart said it hopes to generate $100 billion a year in e-commerce revenue in the next few years and to double that number in the years after that. To do that, the company will dramatically increase its delivery and fulfillment infrastructure, McMillon said. For example, Walmart plans to open 100 market fulfillment centers that will either be located inside a store or built adjacent to one of its stores. The latter approach has been adopted by Walmart’s archrival Target Corp. (NYSE:TGT).
Late last year, Walmart said it would create pop-up e-commerce distribution centers located inside 42 of its regional distribution centers, which generally support Walmart stores with pallet-sized shipments.
Walmart’s U.S. physical store and distribution center footprint totals 926 million square feet, according to data from MWPVL International, a supply chain consultancy that tracks retailers’ supply chain strategies. That is about 1.4 times larger than the square footage of all of Manhattan, MWPVL said. Walmart operates 5,343 stores in the U.S., according to company data. Between 2,500 and 3,000 U.S. stores currently fulfill online orders.
In the U.S., Walmart makes 1.5 million deliveries per week from its stores, said John Furner, the U.S. unit’s president and CEO. The ultimate objective is to deliver any item that’s available to be sold in Walmart’s stores within hours, Furner said. Walmart considers its massive store network to be its ace-in-the-hole in the high-stakes e-commerce fulfillment segment. As of November 2020, Walmart held a 7.7% share of U.S. e-commerce sales, according to Statista, a research firm. By contrast, Amazon was expecting to end the year with a 47% share, a level that will rise to 50% in 2021, based on Statista data.
Brittain Ladd, an e-commerce consultant, said Walmart needs to clarify how big it wants its e-commerce business, especially relative to market leader Amazon.com Inc., (NASDAQ:AMZN) and then determine how much last-mile capacity is needed to hit that goal. “Copying Amazon will do nothing for Walmart,” Ladd said in an e-mail.
Ladd said that Walmart should reconsider an earlier decision not to allow its associates to make e-commerce deliveries. That way the company could expand delivery capacity without going outside its system. On a much larger front, Ladd said Walmart should consider an acquisition of Canadian juggernaut Shopify (NYSE:SHOP), which specializes in designing online stores for merchants, or even acquiring FedEx Corp. (NYSE:FDX).