NEW YORK (AFP) – Walmart reported better-than-expected quarterly profits on Thursday as its reputation for affordability produced strong United States (US) sales growth during the holiday shopping season, offsetting the hit from higher costs.
The giant global retailer, which has seen revenues surge during the Covid-19 pandemic, pointed to some USD400 million in higher-than-expected supply chain costs at its US division, plus an additional USD400 million hit due to employee absences during the Omicron wave of Covid-19.
But these effects were countered by “strong underlying trends” at Walmart US”, aided by robust consumer spending and a strong holiday,” the firm said in an investor presentation.
The company highlighted apparel and automotive goods, along with grocery, as items with especially strong demand during the fiscal fourth quarter, which ended on January 31.
Profits in the latest three months hit USD3.6 billion, compared with a loss of USD2.1 billion in the same quarter of 2020, as revenues climbed 0.5 per cent to USD152.9 billion.
Analyst at GlobalData Neil Saunders pointed to the 5.6 per cent jump in US comparable sales as an especially robust result.
“For a business as dominant and with as much consumer penetration as Walmart, this is an exceptional outcome that underlines the fact Walmart has got a lot of things right during the past two, highly disrupted years,” Saunders said.
Walmart’s annual revenues came in at USD572.8 billion up nearly USD50 billion from two years ago.
Chief Executive Doug McMillon highlighted the increase during a conference call with analysts, quipping that “sometimes it feels like 2020 and 2021 were just one long year.”
Walmart expects sales to growth about three per cent in the current fiscal year, guidance that assumes some improvement in supply chain problems and that “the US consumer remains in a generally favourable economic position throughout the year”, said Chief Financial officer Brett Biggs.
The retail industry, like other sectors, is being forced to navigate a challenging inflationary environment due to higher expenses – and shortages – for materials, shipping and labour.
Walmart has said it has taken a careful approach to raising prices that seeks to spread out the hit across consumer “baskets” so it doesn’t lose customers to other chains.