Walmart's holiday quarter sales surged, according to consumers who are still spending

(Reuters) – Walmart Inc. released its best-ever holiday quarter on Tuesday for at least a decade, spurred by rising grocery and e-commerce sales, and said consumer spending in the US was not slowing. despite recent signs of slowing down.

Shares of the world's largest retailer rose more than 3% on Tuesday in a flat overall market, reaching 7% since the beginning of the year.

The unexpected growth in holiday sales by Walmart and rival Target Corp reflects the health of the US consumer, while spending has remained strong due to the strength of the labor market and lower gas prices.

"We are always very satisfied with the consumer. We have not seen much change, "said Brett Biggs, chief financial officer of Walmart. "The data we see is still pretty healthy. Gas prices are falling year by year, which helps. "

Wall Street investors and badysts expected US spending to slow this year, in a context of rising debt, tariffs and economic uncertainty. Walmart's results have eased the nerves, but doubts remain.

"There are certainly thunderstorms on the horizon," said Charles Sizemore, founder of Sizemore Capital Management LLC, a Walmart shareholder. "A great example would be the overdue loans in the auto sector that are rising … the consumer may be in a difficult period and in 2008, it was the prelude to the global economic downturn."

US retail sales recorded their largest decline in more than nine years in December, the government announced last week, as revenues fell overall, suggesting a sharp slowdown in economic activity in the United States. the end of 2018.

However, total sales for the 2018 holiday season in the United States peaked in six years as buyers were encouraged by the anticipated reductions, according to a Mastercard report released in late December.

Walmart sales in US stores opened at least one year increased 4.2%, excluding fuel, in the fourth quarter ended January 31. The gain exceeded badysts' expectations by 2.96%, according to Refinitiv's IBES data.

Sales were boosted by federal officials who distributed help in the form of food stamps at the start of the partial government shutdown. The disappearance of retailer Toys R Us has also helped Walmart gain market share in toys, the company said.

Adjusted earnings per share increased to $ 1.41 per share, exceeding expectations of $ 1.33 per share, according to Refinitiv. However, gross margins for retailers decreased for the seventh consecutive quarter due to higher transportation costs and investments in e-commerce.

ONLINE SALES SAFE

Online sales jumped 43% in the quarter, in line with the previous quarter's increase, as Walmart's online grocery store pickup and delivery services expanded and a wider badortment was added. website.

However, the company reiterated that it expected an increase in e-commerce losses this year due to ongoing investments. Chief Executive Officer Doug McMillon said during a conference call that the company was focused on getting new customer visits and strengthening the product line.

The company has developed a program that allows customers to order groceries online and pick them up at its stores in the United States, which the retailer believes has increased market share in this market. category. He said that he will have service in 3,100 stores by next January. By the end of the fourth quarter, it was available in more than 2,100 stores.

Walmart will offer grocery deliveries to approximately 800 other stores by the end of the year, bringing the total to 1,600 stores.

Grocery sales currently account for 56% of the retailer's total revenues. Amazon.com Inc is trying to break the food category, especially since it has bought the Whole Foods organic supermarket chain.

Walmart works in partnership with third-party email services and collaborates with so-called studio or freelance drivers, who cost less than full-time employees, to reduce costs, Reuters recently reported.

Deliv, a delivery partner of Walmart in Miami and San Jose, has ended its relationship with the retailer, announced Reuters last week.

The US distributor, which overtook Apple Inc. to become the third largest e-commerce retailer last year, is expected to capture a 4.6% share of the US e-commerce market, behind eBay Inc. and Amazon, according to the eMarketer research firm.

Walmart reiterated its expectation that fiscal year 2020 earnings per share would decline as a percentage, compared to the previous year. With the exception of the acquisition of the Indian company e-commerce Flipkart, the group observes an increase in low to medium values.

McMillon said the company was disappointed by the revised Indian e-commerce regulation, which prohibits companies from selling products through companies in which they have a stake, and also prohibits them from contracting with sellers. to sell exclusively on their platforms.

He added that the Indian government had not consulted Walmart or other US companies before changing the rules. "We hope for a collaborative regulatory process in the future, which will help to balance the rules of the game," he said.

Walmart expects comparable sales growth of 2.5% to 3% for the 2020 fiscal year, excluding fuel and online sales growth of 35%.

Total revenue rose 1.9% to $ 138.8 billion, exceeding badyst estimates of $ 138.65 billion. Walmart experienced 18-quarter comparable US sales growth, more than four years in a row, unparalleled by any other retailer.

The stock rose 3.7% to $ 103.68. Target and Costco Wholesale Corp both grew by more than 1%.