After Record Q4, Walmart Guides to Low Single-Digit Revenue Growth for Year

Coming off a record Q4, Walmart executives cited “aggressive” plans for growth in its e-commerce business, omnichannel offerings and expansion into health and wellness and financial services during a Thursday virtual investor event.

Revenue for the quarter ended Jan. 29 was a record $152.1 billion, up 7.3% from the year-ago quarter, the company reported; U.S. Q4 sales were 7.9% higher at $99.6 billion. Walmart U.S. same-store sales grew 8.6% in the quarter, and U.S. e-commerce sales jumped 69%. Revenue for FY 2021 was $559.2 billion, up 6.7% from the previous year. The company had strong sales performance in categories on customer comfort, leisure and recreation, including home, electronics, sporting goods, toys and outdoor living; stimulus spending benefited January sales, it said.

Revenue growth was below analysts’ expectations. Walmart’s FY 2022 guidance is for low single-digit growth for Walmart U.S., with a slight decline in operating income and earnings per share, said the company. “We know less than we typically do in a normal year,” Chief Financial Officer Brett Biggs said, citing the economy, COVID-19, government stimulus and the vaccines. The stock closed 6.5% lower Thursday at $137.66.

Commenting on decisions the company had to make in 2020 that affected store sales, CEO Doug McMillon cited changes in store hours, limiting the number of shoppers in stores due to social distancing, and in-stock levels. “We were managing our supply chain well, but we didn’t have these huge stockpiles sitting to the side for the surges that we saw in things like consumables,” he said. “If things continue to improve, the vaccine rollout continues, people start to come back out … people will come back to Walmart that may have been shopping locally because they were trying to manage the COVID situation carefully.”

FY 2022 capital investments of nearly $14 billion will be used to build supply chain capacity and automation “to stay ahead of demand, improve the customer experience and increase productivity,” said the company. Biggs said Walmart previously spent 50%-60% of capital on stores; it’s shifting the capital spend now to be able to fulfill customers' orders more quickly in “the way they want to be fulfilled.” McMillon said the changeover to automation created jobs and will create new job opportunities.

Biggs noted the retailer made strategic decisions to reduce exposure in lower growth international markets and focus on higher growth opportunities in the U.S., Mexico and India. “Now is the time to play even more aggressive offense,” he said. Walmart will step up capital investment primarily in the U.S., he said. The retailer’s $40 billion revenue growth last year put it a year ahead of where it thought it would be, Biggs said. Now, it will “lean in” to key markets with increased capital focusing on fulfillment capacity, supply chain, automation and technology, with the goal of expanding e-commerce, while reducing shipping time and cost, he said.

Last year “fast-forwarded” trends Walmart had been building toward, said McMillon, including a service model. “In the future, people will still want to shop in compelling stores, but more and more there will be occasions where they prefer to pick up an order or have it delivered,” he said. Some customers “will eventually allow us, and pay us, to keep them replenished in their homes on the items they routinely purchase." For an increasing number of customers, “Walmart will be seen as a service,” he said: “We won’t just be utilitarian.”

McMillon noted Walmart wasn’t the first place to go for consumers to buy products online, and he said the retailer “has to earn that” role with consumers. That requires the right assortment, price, service and on-time delivery, and “it takes some time to build those kinds of capabilities.” Walmart+ is part of the strategy, but “we don’t want to get ahead of ourselves and sell too many Walmart+ memberships and have a customer experience that’s less than our expectation,” he said. The company may add features to Walmart+ over time, but the current focus is on the net promoter score of the service vs. the number of memberships, he said.

Walmart is in early stages of a new business model that will enable it to serve customers in the way they want to be served and to “thrive in the next generation of retail,” said McMillon. The winners in retail over time will be those that deliver a "unique interrelated ecosystem,” he said.