Walmart will invest about $14 billion in 2021 on things like supply chain and automation, up from the $10.3 billion it spent on capital expenditures in the year that just ended.

Walmart Inc.’s online sales grew 79% for its fiscal year 2021, which ended Jan. 31. Its online sales also grew 69% in its Q4, the retail giant reported.

Sales on the Walmart marketplace and pickup and delivery sales were up year over year by triple-digit percentages, the retailer says. In the grocery segment, pickup and delivery saw record-high sales volumes, reflecting a continued customer shift toward ecommerce and omnichannel options, Walmart says. Walmart now offers pickup of online orders at roughly 7,300 stores and same-day delivery at about 5,200, the retailer says.

Total revenue for the year was $559.15 billion for the year, up 6.7% compared with $523.96 billion for the previous fiscal year. For the quarter, revenue was $152.10 billion, up 7.3% from $141.67 billion for the year-ago period.

Earnings for the year were $13.51 billion, down 9.2% from $14.88 billion a year earlier. In Q4, Walmart reported a loss of $2.09 billion, compared with net income of $4.14 billion in Q4 a year earlier. Q4 results include losses the loss on sales of Walmart’s operations in Japan, the U.K. and Argentina.

Comparable sales grew 9.0% for the year and 8.6% in Q4, excluding fuel sales. Walmart says ecommerce sales contributed about 620 basis points (6.2%) to the Q4 comparable sales growth, excluding fuel. Walmart says three factors affected Q4 comparable sales: Customers consolidated store shopping trips with significantly larger average baskets in Q4 compared with a year earlier and made more purchases via ecommerce. Also, transaction volumes improved when Walmart extended store hours in November 2020.

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“While Walmart’s earnings may have underwhelmed investors in the short-term, what’s important to look at is the retail leader’s long-game strategy. And that game is strong,” says Dan Baril, head of value expansion at Adswerve, a consulting agency that advises marketers on using the Google Marketing Platform, Google Cloud and Google Analytics.

Walmart is capitalizing on a targeted approach to digital advertising and first-party data, Baril says, a strategy that should pay off. “The grocery/household staples game continues to be one of razor-thin margins,” he says. “Walmart is making swift strides in pulling shoppers in and maximizing basket size, which is critical to this cut-throat space.”

Walmart ranks No. 3 in the 2020 Digital Commerce 360 Top 1000.

About Walmart+

In an interview with Bloomberg News, Brett Biggs, chief financial officer, said the holiday performance was “good,” with gift-buying “solid.”

Investors on Thursday’s conference call ask about Walmart+, including the number of subscribers, but management wouldn’t release the figure. During the call, McMillon said he’s more concerned with delivering a great experience for existing members versus gathering new members.

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“For now, we’re focused on continuing a high-quality experience for Walmart+ members as we add capacity. Over time, we’ll add more benefits to the membership to broaden its appeal,” McMillon said.

In response to an analyst’s question, McMillon added: “We don’t want to get ahead of ourselves and go sell too many Walmart+ memberships and have a customer experience that is less than our expectation, or their expectation.”

Analysts estimate that Walmart+, which launched in September as a rival to Amazon Prime, has as many as 9 million members. Meanwhile, Prime, which launched in 2005, has an estimated 142 million U.S. members, according to Consumer Intelligence Research Partners LLC (CIRP). CIRP estimates 13% to 14% of Walmart.com customers joined Walmart+ as of Jan. 30. In the U.S., Walmart.com customers spend an average of $1,000 per year at the website, CIRP says.

“Walmart + has grown very quickly for a subscription based loyalty program, and the growth is concentrated among millennials according to recent Kobie research,” says Kate Hogenson, senior loyalty and CX consultant at Kobie, loyalty marketing company.

“Other researchers found that almost 20% of Walmart+ members migrated from Amazon Prime. This says Walmart has the opportunity to be a real contender against competitors like Amazon, as long as it continues to invest in convenient services, digital innovation and takes into account customer insights gleaned from Walmart+,” Hogenson says.

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COVID-19 expenses exceed $1 billion

Walmart said adjusted operating income in constant currency decreased 3.2% in the quarter. That was primarily due to about $1.1 billion in COVID-19-related expenses during Q4, including associate bonuses and the company’s decision to repay about $220 million in property tax relief in the United Kingdom.

During a Feb. 18 conference call with analysts, CEO C. Douglas McMillon said growth was strong across the company, even as the retailer took steps to protect the health of employees and customers because of the COVID-19 pandemic, including adding more capacity for pickup and delivery of orders placed online and adding hundreds of thousands of employees to its workforce.

“We found ways to support the explosive growth in ecommerce and learned how to hire people in hours rather than days, which enabled hundreds of thousands of people to get work when they really needed it and when we really needed them,” McMillon said.

Tech spending

In addition to spending more on salaries, Walmart says it will invest about $14 billion this year on things like supply chain and automation That’s up from the $10.3 billion it spent on capital expenditures in the year that just ended. Those kinds of investments will help it expand in growth areas like micro-fulfillment of groceries and better digital experiences for customers.

“We need more space for fulfillment centers, but also for some of the innovative things we’ve seen in the supply chain,” Biggs told Bloomberg. “That includes pallets that are aisle-ready and making grocery-picking more efficient in the back room. A lot of dollars are going toward that.”

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When asked by an analyst whether the investments in wages and the supply chain are totally new, or were pulled forward from a more long-term plan, McMillon said they were planning to do all this over time, but the pandemic forced them to act faster. He also cited the conflicting demands on Walmart’s resources, as it must juggle what it doles out in wages versus money for supply chain improvements.

Guidance for current year

After an unprecedented year marked by shortages of staples like toilet paper, surging web traffic and constant shifts in demand from quarantined consumers, Walmart expects a return to more normal business patterns in calendar-year 2021. But it won’t be business as usual. The retailer is pushing into new areas like advertising and web marketplaces, looking to capitalize on the connections it already has with shoppers. But those moves, along with the wage increase, will cost money and there’s no guarantee they will all pan out.

The retailer said Thursday earnings per share will decline slightly in the fiscal year that just started (fiscal 2022), though will be flat or slightly up when excluding the cost of divestitures. Although U.S. comparable sales will stay positive this year, they’ll rise in the low-single-digits, below the recent breakneck rate but on pace with estimates.

“We expect continued strong growth in the U.S. businesses and expect even higher international growth rates as we focus on key markets and making money in new ways. We’ll continue improving margin mix through an enhanced general merchandise offering, new brands and marketplace growth with a greater push towards expanding fulfillment and other services for sellers. We’ll drive existing and new customer growth through initiatives like Walmart+,” Biggs said during the Feb. 18 conference call.

Wage hikes

Walmart pledged Thursday to raise wages to an average of more than $15 per hour, up from a current average of more than $14 per hour. About 425,000 employees—out of roughly 1.5 million in the U.S.—are slated for increases, mostly in roles that support its digital and stocking operations, U.S. CEO John Furner said in a separate memo to workers Thursday.

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Biggs told Bloomberg the wage hike is “focused on roles that will help us fulfill our strategy around online pickup, delivery and ecommerce.” He also said he wants to create more of a “ladder of opportunity” for the retailer’s sprawling workforce, some of whom joined the retailer after losing jobs in occupations negatively impacted by the pandemic.

The move comes amid calls from President Joe Biden to gradually increase the federal minimum wage to $15 per hour to lift hundreds of thousands of Americans out of poverty. CEO Doug McMillon recently said Walmart opposes a universal wage of $15 as increases should reflect regional norms, and this move—an average starting rate, not a minimum one—means some workers will still be below that $15 threshold. New starting rates are moving to between $13 and $19 per hour.

For the quarter ended Jan. 31, Walmart reported:

  • Revenue of $152.10 billion, up 7.3% from $141.67 billion for the year-ago period.
  • A net loss of $2.09 billion, compared with net income of $4.14 billion in Q4 a year earlier. Q4 results include losses the loss on sale of Walmart’s operations in Japan, the U.K. and Argentina.
  • Operating income of $5.49 billion, up 3.1% from $5.32 billion a year earlier.
  • Comparable sales growth of 8.6%.
  • The retailer now offers pickup of online orders at roughly 3,750 stores and same day-delivery at about 3,000.
  • Ecommerce growth of 69% year over year.
  • Sam’s Club comparable sales increased 10.8% and ecommerce sales at the warehouse club unit grew 42%.
  • It will invest in U.S. wages, raising the associate average to above $15 per hour.

For fiscal year 2021, ended Jan. 31, Walmart reported:

  • Revenue of revenue of $559.15 billion, up 6.7% compared with $523.96 billion for the previous fiscal year.
  • Net income of $13.51 billion, down 9.2% from $14.88 billion a year earlier.
  • Operating income of $22.55 billion, up 9.6% from $20.57 billion in the prior fiscal year.
  • Comparable sales growth of 8.6%
  • Ecommerce growth of 79% year over year.
  • Sam’s Club comparable sales increased 11.8%.
  • Walmart International net sales increased 1.0%, or 5.2% in constant currency.  Mexico, Canada and the retailer’s Flipkart unit in India showed strength.

Percentage changes may not align exactly with dollar figures due to rounding.

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