By Juveria Tabassum and Aishwarya Venugopal
Feb 19 (Reuters) – Walmart’s new CEO John Furner kicked off his tenure with a conservative outlook for the coming year, reflecting the fragile state of the U.S. consumer, even as the retailing giant posted another quarter of steady sales driven by its growing online business.
Investors were expecting a guarded outlook from Furner, who took the helm earlier in the year. Walmart’s reach and reputation for low prices has kept it ahead of its competition during a challenging time for U.S. consumers dealing with rising costs and an uncertain labor market.
“In the U.S. we see the customers being choiceful in their spending … for households earning below $50,000, we continue to see that wallets are stretched,” Furner said on a post-earnings call.
The company’s U.S. same-store sales rose 4.6% for the quarter ending January 31, exceeding estimates, led by a 27% increase in U.S. online sales, its 15th straight quarterly double-digit increase in that area.
Online sales have been driven increasingly by wealthier customers who had not been traditional Walmart shoppers, a cohort the company is increasingly banking on to drive growth.
The company’s shares, up 20% over the last year, closed down 1.4% on Thursday. Walmart earlier this month hit $1 trillion in market valuation, the first pure-play retailer to reach that milestone.
Walmart also announced a new $30 billion buyback plan. The company expects net sales to grow 3.5% to 4.5% for the coming year, similar to its initial outlook for the year that just ended, even as analysts’ expected growth was about 5%, according to data compiled by LSEG.
ECOMMERCE SHINES
Households earning more than $100,000 have been shopping more at Walmart’s e-commerce platforms, and have been increasingly responsible for the company’s market share gains over the past two years.
Shoppers using fast delivery in under three hours grew more than 60% for the year.
Contribution to U.S. sales from e-commerce almost doubled in the quarter for Walmart, and overall revenue rose 5.6% to $190.66 billion, slightly ahead of expectations.
“Given (Walmart’s) scale and infrastructure, it has even more opportunities to capitalize on e-commerce growth … the company has the ability to really stand out in a sea of retailers,” said David Silverman, analyst at Fitch.
Walmart has bucked broader weakness in consumer spending on higher-priced items that has plagued retailers such as Target over the past two years, as its investments in its e-commerce business begin to pay off.
Walmart expects adjusted earnings per share of $2.75 to $2.85 in fiscal 2027, below expectations of $2.96. The company’s fourth-quarter adjusted earnings per share of 74 cents beat estimates of 73 cents.
THE FURNER ERA
Markets have cheered Furner’s appointment, following his leadership of Walmart’s U.S. business through the pandemic and his efforts to adapt to AI‑driven changes ahead of rivals. Walmart’s U.S. unit, now led by David Guggina, accounts for nearly 70% of its annual revenue.
The company now faces the task of scaling higher‑margin revenue streams such as advertising, while maintaining store performance and margins. Its global advertising business surged 37% in the quarter.
Advertising income and membership fees represented nearly one-third of its operating income this quarter, executives said on a post-earnings call.
“With cautious guidance for the year ahead, the outlook implies a resilient but value-focused consumer, with limited appetite for discretionary or big-ticket purchases,” said Russell Shor, Senior Market Analyst at Tradu, a Jefferies-owned trading platform for retail investors.
(Reporting by Siddharth Cavale in New York and Juveria Tabassum and Aishwarya Venugopal in Bengaluru; Editing by Arun Koyyur and Nick Zieminski)
