Walmart will unveil this week its fight with Amazon to earn money by buying his Christmas shopping. Some on Wall Street expect the retailer to announce its weakest profit margins for years, along with rising sales.
Despite government data released last week that US retail sales in December had the sharpest decline since 2009, the perimeter-wise revenues of the country's largest retailer are expected to have increased about a fifth faster during its crucial fourth quarter than a year ago.
However, the results of the supermarket juggernaut, which operates more than 11,200 stores worldwide, should also show how investments made to improve competitiveness in the digital age are affecting profitability.
"This requires spending when you compete with Amazon in the long run," said David Schick, Managing Partner at Consumer Edge Research. "These are heavy investment initiatives."
Rising transportation and labor costs are putting additional pressure on Walmart, which employs more than 2.2 million people. The company offers truckers an increase of nearly $ 90,000 on average in order to attract hundreds of drivers for its fleet of delivery vehicles.
Gross margins are expected to have fallen to 23.9%, according to the estimates of the brokers gathered by S & P Capital IQ, which would be the lowest in at least eight years.
Doug McMillon, Chief Executive Officer, has already warned shareholders that Walmart should invest and take risks as it seeks to "reinvent the retail business".
Initiatives include picking groceries at more than 2,000 stores and a new delivery service in more than 35 US cities. Workers are equipped with portable applications and magazines with automated scanners.
Online, the company relaunched Walmart.com and Jet.com, New Jersey's online commerce site that it bought for about $ 3 billion in 2016.
Investors are counting on better measures from online businesses, whose stuttering performance over the holiday season of the previous year has highlighted concerns about Walmart's ability to compete with Amazon.
According to S & P Capital IQ, sales in the United States are expected to increase by 3.1% in the coming three months to the end of January. This would be a deceleration from 3.4% in the previous quarter, but a recovery from the unexpected weakness of 2.6% in the prior year quarter.
Walmart's profits will be the latest in a series of mixed figures on the health of US consumers.
Wall Street is skeptical about the accuracy of economic data released last week that retail sales fell 1.2% year-on-month. Other figures have highlighted a strong labor market.
"If Walmart's sales have made good progress, it would suggest that government figures are wrong," said Neil Saunders, chief executive of GlobalData Retail. "Walmart is an indicator of the economy. It's almost representative of the way people spend. "