U.S.Stocks Snapped a Six-Day Winning Streak as Walmart Earnings Miss Estimates

By Joyce Yu

Philadelphia, PA–Wall Street opened lower with triple digit fall as disappointing Walmart earnings hit sentiment. Walmart on Tuesday reported earnings that missed analysts’ expectations for the holiday period, with a net income of $2.17 billion, or 73 cents a share. This is much lower than that of a year earlier which was $3.76 billion, or $1.22 cents per share. Excluding one-time items, Walmart earned $1.33 a share, missing analysts’ estimates by 4 cents. Shares of Walmart fell 9% in the morning session.

Despite higher revenue and same-store sales, its gross margins were hit during the quarter due to promotional activity and its intensified competition with Amazon. “During the quarter, [Walmart] had additional EPS headwind related to some smaller unplanned items and expenses we incurred as we pulled forward initiatives in order to take advantage of a higher tax deduction,” CFO Brett Biggs said.

The company’s online sales are slowing, igniting concerns whether it will be able to keep pace with Amazon.com which saw its Q4 sales, including that from Whole Foods, jumped nearly 40% in the latest period. Walmart’s acquisition of Jet.com, on the other hand, seems to run out of steam after giving an initial boost. Walmart’s online sales grew just 23% during the period, much slower than the prior quarter’s 50% jump.

“Jet.com complements Walmart.com nicely,” CEO Doug McMillon said on a conference call with analysts and investors. He further explained, “We’re going to continue expanding our e-commerce businesses as it relates to food … with online grocery ramping up. He also expected the yearly growth of e-commerce sales “will be approximately 40%”. Walmart is preparing roll out a revamped website this year, with a focus on fashion and home goods.

Also announcing its earnings this morning is Home Depot which reported Q4 earnings and sales that both topped Wall Street’s expectations. Neil Saunders of GlobalData Retail said favorable economic conditions combined with improving housing market, have been the fuel powering Home Depot’s growth. He expects this will continue into 2018 as a shortage of housing in many US markets is keeping prices inflated while demand remains strong.

On individual stocks, shares in Rite Aid are surging on Tuesday after Albertsons, owner of grocery store ACME, agreed to buy the drug store company and its thousands of stores. Rite Aid which just sold nearly 2,000 of its stores to Walgreens Boots Alliance at $4.4 billion, will sell the remaining stores to Albertsons which will become a publicly traded company on the New York Stock Exchange after the deal is completed.


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