Walmart Inc. is likely to continue with its solid trend and witness a rise in the top and bottom lines when it reports fourth-quarter fiscal 2021 numbers on Feb 18, before market open. The Zacks Consensus Estimate for earnings has increased 2% in the past 30 days to $1.50 per share, which also indicates growth of 8.7% rise from the figure reported in the prior-year period. Markedly, Walmart delivered an earnings surprise of 12.6% in the last reported quarter. Further, the supermarket giant has a trailing four-quarter earnings surprise of 11.1%, on average.
The Zacks Consensus Estimate for revenues is pegged at $146.4 billion, suggesting an increase of 3.4% from the prior-year quarter’s reported figure. However, it looks like the rate of sales growth will decelerate on a sequential basis. The company had witnessed an increase of 5.2% in the last reported quarter.
Key Factors to Note
Walmart has been benefiting from burgeoning demand amid coronavirus-led elevated at-home consumption as well as stock hoarding. Further, higher stay-at-home trends are boosting the company’s e-commerce sales. The company, on its third-quarter earnings call, said that it has doubled the U.S. store associate count this year, supporting the company’s digital and omnichannel efforts. Certainly, Walmart’s combination of a robust store network and growing digital capacity bodes well.
Incidentally, Walmart has been taking robust strides to strengthen its delivery arm, especially amid the pandemic-led increased demand. This is evident from the company’s launch of the Walmart+ membership program; drone delivery pilots in the United States with Flytrex, Zipline and DroneUp; and a pilot with Cruise to test grocery delivery through self-driven all-electric cars. Walmart also unveiled an alliance with Door Dash in the third quarter to deliver prescriptions from pharmacies of Sam’s Club, alongside expanding Scan & Go to all fuel stations at U.S. Sam’s Clubs. Prior to this, Walmart unveiled Express Delivery during the first quarter at several stores, which helps it deliver orders to customers in less than two hours. As of the fiscal third quarter, Walmart U.S. had 3,600 pickup locations and 2,900 same-day delivery locations.
These factors have been boosting Walmart’s e-commerce business, which along with its solid efforts to bolster store sales helped its U.S. comp sales to increase for the 25th straight time in the last reported quarter. We note that the big-box retailer has been undertaking several efforts to enhance merchandise assortments and it has also been focused on store remodeling, to upgrade them with advanced in-store and digital innovation. Apart from these, the company’s unique deals and saving events, along with other initiatives to make the most of consumers’ evolving shopping needs and the holiday season are likely to have yielded results.
That being said, we cannot ignore the impact of the company’s pricing investments on margins. Also, the company has been seeing high costs related to COVID-19, like higher wages and benefits along with costs associated with sanitization and other safety measures. The company incurred roughly $600 million as additional costs related to COVID-19 in the third quarter of fiscal 2021. Management in its last earnings call said that it expects pandemic-related costs to prevail for a while, alongside some general uncertainties globally.