Walmart on Thursday reported slower sales growth at its U.S. stores during the holiday quarter. And that at least keeps a streak going.
The 0.6 percent increase in sales at U.S. stores open more than a year marks the chain’s sixth straight three-month period of growth after a long run of decreases.
And yet the gain is a relatively modest one, especially compared to the 1.5 percent growth it experienced in the same period last year, underscoring the challenges Walmart is facing as it tries to win over customers with cleaner, better-stocked stores and a more competitive digital offering.
Underscoring the challenge further: Walmart lowered its revenue forecast for the year, saying it now expects to see flat sales instead of 3 to 4 percent growth. The chain said the change in expectations is because of the continued strength of the U.S. dollar and the impact of the decision it announced it January to close 269 of its stores across the globe. This more muted guidance is likely a key reason why its stock fell nearly 5 percent in early trading.
Walmart has been ramping up its efforts in the last year to become a more serious rival in e-commerce to Amazon.com. It has rapidly expanded to 20 metropolitan areas a service that allows customers to buy groceries online and pick them up curbside at a Walmart store. It is testing Shipping Pass, an Amazon Prime-like program that would offer shoppers unlimited three-day shipping on their orders. Walmart even tried to steal some of Amazon’s thunder on the Seattle company’s Prime Day deals bonanza, launching a rival online sale of its own. (Jeffrey P. Bezos, the chief executive of Amazon, owns The Washington Post.)
And yet, for all those efforts, some of the numbers in Thursday’s earnings report only serve to showcase how much Amazon is still pummeling Walmart in the category. Walmart said its online sales growth for the full year was 12 percent, with a total e-commerce sales haul of $13.7 billion. That may sound like a healthy increase, until you consider that Amazon’s total e-commerce sales during the same period were north of $83 billion.
Walmart reported Thursday that it pulled down $130 billion in revenue in the quarter, a 1.4 percent decrease from the same quarter last year. Excluding the impact of currency exchanges, the company said its revenue was $134 billion and was up 2.2 percent.
Walmart had previously warned that its profits would be pressured this year as it hiked wages for its workers and spent billions to shore up the infrastructure of its online business. In this quarter, profit dipped 8 percent to $4.5 billion. Earnings per share were $1.49, slightly better than the $1.46 that analysts had expected.
The company’s U.S chief executive, Greg Foran, told reporters on Thursday that he is “actually pretty pleased with how we traded through” a holiday season that was a disappointing one for the broader retail industry. Foran said Walmart, like many of its retailing counterparts, saw unseasonably warm weather take a toll on apparel sales in the quarter. But, the chain also believes it benefited somewhat from lower gas prices, and said it believed its new approach to holiday promotions was successful. Instead focusing on one-day Black Friday discounts, Walmart put more emphasis this year on price rollbacks that lasted throughout the full holiday shipping.
After eliminating its fleet of 102 small-format Express stores, Walmart plans to spend this year doubling down on improving its thousands of supercenters and its newer Neighborhood Market concept, which is smaller than a traditional Walmart store and is focused primarily on groceries. Neighborhood Markets experienced a 7 percent increase in sales at stores open more than a year, a comparatively strong showing that helps make clear why Walmart wants to make this format a pillar of its future growth strategy.
The retailer restated a previous promise to improve its fresh food offering in both of its store formats, a goal that reflects consumers’ changing eating preferences. Foran said the company is testing different store layouts for these goods, including moving leafy green vegetables to the front of the refrigerated case. And executives are also trying to get smarter about how the keep inventory, keeping shelves stocked enough to keep customers happy, but not so much that food has to be thrown away.