Published: Wed, February 21, 2018
Money | By Armando Alvarado

S&P, Dow falter after six days of gains as Walmart weighs

S&P, Dow falter after six days of gains as Walmart weighs

The stock price fell by over 10%, Walmart's biggest decline in over 30 years, as investors panicked that the U.S. retail giant is "Amazon-fodder" waiting to happen - and a 42% fall in quarterly earnings didn't help calm anyone's nerves.

In particular, the 23% online sales growth in Q4 was neither as promising as the 29% recorded in the same period previous year, nor with the 50% growth reported in Q3. However, the growth of its online sales in the US was just 23% during the quarter, in contrast with the three previous quarters of growth of over 50%.

Looking ahead, the firm calls for comparable sales growth of 2 percent at Walmart U.S.; consolidated net sales growth of 1.5 percent to 2 percent; e-commerce sales growth of 40 percent (U.S.); and EPS of $4.75 to $5. Retail giant Walmart is one of the major players attempting to fight Amazon's rapidly growing influence on its home turf, but the company's efforts appear to have fallen far short of the needs of the hour. Non-food e-commerce has not been our historic competency over the last few decades and the history of the company, and so we're learning something new. This is also compounded by fears from the investor side that Walmart would not be able to keep up with Amazon (NASDAQ:AMZN)'s online retail business.

However, despite the poor performance, Walmart executives remain upbeat about the future of the company's e-commerce division.

The market is coming off a six-day winning streak.

Walmart's ambitious plan to shift the focus of its $500 billion operation from brick-and-mortar to e-commerce hit a surprising bump in the 2017 holiday season, the company's latest financial reports revealed. On a reported basis, earnings per diluted share were 73 cents. The average analyst estimate was $1.37 per share, according to Thomson Reuters I/B/E/S.

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Shares were down more than four percent in pre-market trading to $100.48 after Walmart reported a 42.1 percent drop in earnings to $2.2 billion for the quarter ending January 31. Consolidated operating income fell 28 percent to $4.5 billion. The declines were mainly due to one off charges related to the new U.S. tax rules.

Sales at US stores open at least a year rose 2.6 percent, excluding fuel price fluctuations, while the market expected a rise of 2 percent, according to Consensus Metrix.

"Walmart and the staples in general are really dragging us down", said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago.

"We are now analyzing the accounting impact of the Tax Act, but our analysis is incomplete", the company said in a statement. "We made good progress this past year to save busy families time and money and we will do more".

The stock was down $9.43 to $95.35.

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