Higher Comparable Sales and E-Commerce Growth To Drive Walmart’s Fiscal 2020

Walmart (NYSE: WMT) reported its fourth quarter and full-year fiscal 2019 results on Tuesday, February 19. The company’s revenues were in line with expectations, while its adjusted EPS beat market expectations. On a reported basis, the company’s revenue increased 2% year over year (y-o-y) to $139 billion, driven by growth in the domestic market due to its marketplace offerings. Walmart’s adjusted EPS grew by 6% y-o-y to $1.41. Walmart U.S. delivered a strong top-line performance, with comparable sales of 4.2%, which topped the consensus estimate of 3.3%. This growth was driven by a 0.9% increase in customer traffic and a 3.3% growth in ticket size in Q4. Overall, e-commerce contributed approximately 180 basis points to the segment’s comparable sales growth in the fourth quarter. On a constant currency basis, the company’s U.S. e-commerce sales increased 43% in the quarter. In the company’s other segments, Walmart’s international sales declined 2% y-o-y to $32 billion, driven by the sale of a majority stake in Walmart Brazil and negative currency impacts. On the other hand, Sam’s Club revenues declined 4% y-o-y, negatively impacted by tobacco. However, Sam’s Club comparable sales grew 3.3% y-o-y (ex. fuel) in the quarter, led by a solid jump in traffic.

Our $103 price estimate for Walmart’s stock is about in line with the current market price. We have created an interactive dashboard on What To Expect From Walmart’s Fiscal 2020 Earnings, which outlines our forecasts for the company. You can modify our forecasts to see the impact any changes would have on the company’s earnings. In addition, you can see all of our Trefis Retail company data here.

Going forward, we expect Walmart’s earnings to decline in Q1, due to investments in technology and a rise in employee wages. In addition, we expect online grocery to drive some growth for the company, though the accompanying expenses could result in margin pressure. Further, we also expect the company to continue to post an increase in its revenue growth rate, driven by growth across operating segments.

Fiscal 2020 Outlook

Walmart expects its consolidated net sales to grow at least 3% in constant currency in fiscal 2020, driven by the acquisition of Flipkart. It also expects a decline in EPS in low single-digits compared to fiscal 2019. In addition, the company expects comparable sales to range between 2.5% and 3.0%. The retailer’s management is aggressively rolling out grocery pickup and delivery in the U.S. and expanding omnichannel initiatives in Mexico and China. We expect Walmart to generate around $532 billion in revenues in fiscal 2020, and earnings of almost $14 billion. Of the total expected revenues in fiscal 2020, we estimate $343 billion in the Walmart U.S. business, almost $127 billion for the Walmart International business, and nearly $58 billion for the Sam’s Club business.

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