Dive Brief:

• Walmart’s U.S. business saw comparable-store sales rise 8.3% and e-commerce sales increase by roughly 17% in the fourth quarter — very similar to the retailer’s results in Q3, the company reported Tuesday morning. December marked the largest sales month in Walmart U.S.’s history, which was led by food categories, CFO John David Rainey told investors.
• The company continued to see significant share gains in its grocery business, and private brand penetration rose about 1.6% as shoppers placed a priority on value, Rainey said.
• Inflation also remained at an elevated level that was similar to the previous quarter, with food inflation in the mid-teens, Rainey said. Looking to the year ahead, Walmart executives said they are taking a cautious approach given continuing uncertainties with inflation, especially as they expect to see “stubborn” high prices in dry grocery and consumables. 

Dive Insight:

While Walmart’s Q4 sales were higher than expected and its grocery sales in the U.S. saw growth in the mid-teens, declines in general merchandise sales and the ongoing impacts of inflation on consumer spending are weighing down the company, executives noted during an earnings call. 

“The effects of product mix shifts have negatively impacted our margins,” Rainey said on the call, adding that grocery and heath-related sales have gone up by more than 3% over the past year.

Walmart executives noted that they don’t expect that shift from general merchandise to food to improve. Instead, they said they think it will get slightly worse. Already, food inflation was higher than Walmart executives were expecting — and wanting — to see coming into the new year.

A key unknown for the retailer is how inflation — particularly with food — will play out in the year ahead and the impact it will have on consumer behavior, executives noted. While fresh food inflation has been volatile with sharp swings — like the recent skyrocketing of egg prices — dry grocery inflation hasn’t budged much. Going forward, Walmart executives expect dry grocery and consumables inflation to remain in the mid-double digits for “a while” and also put the biggest pressure on consumers’ wallets. 

For fiscal year 2024, the retailer is predicting Walmart U.S. comp sales, excluding fuel, to increase between 2% and 2.5% and adjusted earnings per share to be $5.90 to $6.05. “There’s a lot of unknowns in the back half of the year,” Rainey said. 

The retailer expects its consolidated operating expenses to increase slightly as a percentage of its worldwide net sales, which it is predicting will increase 2.5% to 3%.

“Attempting to predict with precision the swings and macroeconomic conditions and their effect on consumer behavior is challenging,” Rainey commented on Walmart’s guidance for Q1 and FY 2024. 

Rainey noted that Walmart is “positioned well” for the challenges ahead, and company executives pointed to the retailer’s diversification of revenue through its advertising, fulfillment and marketplace services, along with its growing e-commerce efforts, as exampes of how it’s looking to build profitability going forward. 

On the digital innovation front, President and CEO Doug McMillon said Walmart’s work to become an at-scale omnichannel retailer is allowing the company to tap into “unique” technology opportunities, citing its conversational artificial intelligence platform, which is used by more 50 million customers and 1 billion associates across Mexico, Canada, the U.S. and Chile, as one of them. 

In Q4, Walmart’s e-commerce sales were led by continued strong growth in store-fulfilled pickup and delivery, executives said. 

“Over the last two years, store-fulfilled delivery sales have nearly tripled and we’re now doing over a $1 billion a month,” Rainey said.