Walmart (WMT 95.05, -9.73, -9.3%) was plenty profitable in the fourth quarter and it expects to be plenty profitable in fiscal 2019. The problem for its stock today is that the company's fourth quarter profit and outlook were not as plentiful as analysts and investors had been expecting.
For the three months ended January 31, 2018, Walmart reported an adjusted profit of $1.33 per diluted share, up 2.3% from the same period a year ago on a comparable basis. Consolidated net sales for the period, however, jumped 4.2% to $135.15 billion, bolstered by a stronger than expected 2.6% increase in comparable sales for the Walmart U.S. business and a 2.4% increase at Sam's Club, excluding fuel.
Walmart was unable to leverage the sales growth into stronger profit growth, however, on account of some gross profit margin pressure that was related to price investments, the mix effect of its eCommerce business, inventory markdowns associated with Sam's Club store closures, and other international items like the wind-down of Brazil's first part eCommerce business.
To be fair, Walmart has done a commendable job capitalizing on its multi-channel sales strategy. The 2.6% comparable sales increase was powered by a 1.6% increase in traffic and a 1.0% increase in ticket, demonstrating customers are finding a basis to visit more, and spend more, at Walmart both in-store and online.
Walmart U.S. comparable sales jumped 2.1% in fiscal 2018, which was the highest growth rate since fiscal 2009. Furthermore, comparable sales growth of 4.4% on a two-year stack basis was the best showing in eight years.
It is Walmart's intent to keep investing in its business to ensure long-term success. Accordingly, management acknowledged its investments will pressure the consolidated gross profit margin rate some in fiscal 2019, but not to the extent they did in the fourth quarter.
That disclosure, and the notice that the slowdown in eCommere growth in the fourth quarter was a bit more than planned, took some of the wind out of Walmart's reporting sails.
eCommerce sales growth slowed to 23% from 50% in the third quarter, as Walmart lapped the comparison periods for its Jets.com acquisition. Management said the eCommerce business faced some operational challenges in the quarter, but that it feels good about its eCommerce business overall, which it expects to deliver about 40% growth in fiscal 2019.
Looking at fiscal 2019 overall, Walmart anticipates consolidated net sales growth of 1.5% to 2.0% in constant currency, comparable sales growth at Walmart U.S. of at least 2.0%, excluding fuel, and comparable sales growth at Sam's Club to be between 3.0% and 4.0%, excluding fuel and tobacco.
Earnings are anticipated to be between $4.75 and $5.00 per share, including an approximately $0.05 per share benefit from currency based on current rates. That is up from the guidance range of $4.52 to $4.62 the company provided in October, yet analysts were still expecting more as the high end of the new guidance range is below their average expectation.
Shares of WMT have had a terrific run in recent months, surging as much as 40% from their lows last October.
Walmart is definitely doing well in the face of fierce competition from Amazon.com (AMZN 1467.83, +19.15, +1.3%) and Target (TGT 73.12, -1.96, -2.6%), yet the total fourth quarter performance and fiscal 2019 outlook weren't as robust as investors had been expecting given the run the stock has made. Accordingly, the stock is getting hit hard today on the notion that it has gotten too far ahead of itself.