New York: Walmart announced another round of strong sales on Thursday amid the coronavirus pandemic as it announced major investments in increasing employee wages and technology to drive demand for e-commerce.
The retail giant, which has become a one-stop shop for many consumers during the pandemic, said the new investments will boost delivery and pavement delivery programs associated with e-commerce and raise wages for about 425,000 U.S. workers.
But stocks fell sharply after the announcements, which included a disappointing loss in the fourth quarter of the year and expectations of slowing US sales growth and a slight drop in profits next year.
“Our business is strong, and we’re making it stronger through targeted investments to accelerate growth,” Chief Executive Doug McMillon said in a press release.
Walmart reported a loss of $ 2.1 billion in the fourth quarter on its asset sales account, compared to a profit of $ 4.1 billion in the same period last year.
Revenue rose 7.3% to $ 152.1 billion, as the company indicated a rebound from a robust holiday shopping season and an upgrade from a new U.S. government stimulus package enacted at the end of 2020.
For the full year of 2020, Walmart reported a profit of $ 13.5 billion, down 9.8%. Annual revenue jumped 6.7% to $ 524 billion.
An essential store
Designated as a “primary” store as a place for groceries and other consumables, Walmart was among the beneficiaries of the coronavirus shutdowns in the spring when other retailers were forced to close.
Sales soared throughout the year even as Walmart sometimes struggled to keep up with demand for sometimes unexpected items, like bandanas, that were used earlier in the pandemic as face masks.
Throughout 2020, Walmart has hired more than half a million people, including new employees to hand out pavement items and interface with customers, and other workers to fill in those on vacation.
In a presentation to Wall Street analysts, Walmart executives said they are planning new investments in automation and supply chain improvements.
“This year things have been really quickly redirected in terms of customer behavior,” Macmillon said. “We believe the vast majority of this behavior will continue.”
Macmillon said the spending would boost e-commerce offerings and the appeal of Wal-Mart +, a subscription plan that includes grocery delivery and is a competition to Amazon’s Prime service.
Walmart projected capital expenditures of $ 14 billion in fiscal year 2022 compared to $ 10.3 billion in the year just ended.
Neil Saunders, analyst at GlobalData, said weak profit forecasts in light of spending are inevitable.
“Such spending is necessary, especially in areas like automation that will generate long-term savings, so this is a state of light pain in the short term for long-term gains,” Saunders said in a note.
High minimum wage
The wage increases will raise the average Walmart employee’s wage in the United States to over $ 15 an hour.
However, Walmart has not changed the national minimum wage – Currently $ 11 an hour – This partly reflects the difference between the high and low cost regions in the United States.
About 730,000 of the 1.5 million US Walmart employees would receive at least $ 15 an hour with the most recent change.
President Joe Biden and Democrats in Congress defended legislation to increase the US minimum wage to $ 15 an hour from $ 7.25 an hour.
However, the fate of the proposal is uncertain. Republicans have so far opposed the plan, and even some Democrats have held back on the size of the increase. Some experts also said the wage increase should take into account the regional cost of living.
McMillon, in response to an analyst’s question, said that Walmart wanted to maintain its system of worker promotion and that many of the employees that would benefit from the new increase were the company’s veterans.
“We’re trying to push this average up, to build this ladder and keep getting mates who come through our system and become store managers,” Macmillon said.
“Obviously we’re very aware of what’s going on nationally with this discussion of $ 15 and we think that’s an important target,” Macmillon said.
“But I also think it should go well for the US economy and you can look at us as a model.”
Shares fell 6.5% to $ 137.66.