Coverage: Walmart earnings show strong consumer spending

Walmart Inc. posted its strongest holiday quarter in at least a decade on Tuesday, boosted by higher grocery and e-commerce sales, and said it saw no signs of weakness in U.S. consumer spending despite recent signs of a slowdown.

Nandita Bose of Reuters reported the news:

Online sales jumped 43 percent in the quarter helped in particular by the expansion of Walmart’s online grocery pickup program to more than 2,100 stores by year end.

Shares of the world’s largest retailer rose 2.2 percent on Tuesday in a broadly flat market, putting them up 9.7 percent so far this year.

Walmart and rival Target Corp’s unexpectedly strong growth in holiday sales reflected the health of the U.S. consumer as spending remained robust due to a strong labor market and cheaper gasoline prices.

“We still feel pretty good about the consumer. We haven’t seen much of a change,” Walmart Chief Financial Officer Brett Biggs told Reuters. “The data we are seeing still looks pretty healthy. Gas prices are down year over year, which helps.”

Teresa Rivas of Barron’s reported that Walmart has made progress in online sales:

Disruption has been the buzzword in retail for years now, but if any company seems poised to survive and thrive in the long term, it’s Walmart. The company’s deep pockets mean that it has the ability to spend on a variety of sales channels, offer competitive shipping rates, and make strategic investments—all factors that have become increasingly important in a world reshaped by Amazon.

Walmart wrote the book on price competition, and it hasn’t been shy about breaking into new areas, from stocking groceries to investing in Flipkart. As Tuesday’s results show, the company’s online sales are becoming an increasingly important part of the mix, and they’re trending in the right direction. Moreover, the market appears to have grown more comfortable with the fact that this is coming at the expense of margins, at least near term, as Walmart moves to aggressively claim market share and leverage its store base to rival the convenience Amazon offers.

Last year may have been a difficult one for the stock, and the new retail wars won’t be won in a day, but Walmart appears to be making the right moves and savvy investments to position itself for the future—whatever that may bring.

Walmart was up 3.5% to $103.49 on Tuesday morning.

Andria Cheng of Forbes.com reported that Walmart wants to increase its home and apparel sales:

Expect more Walmart action on the apparel and home front. While Walmart is counting on e-commerce to be a key U.S. growth driver, management acknowledged losses from the online business will continue to increase this year. What may change that? Walmart has “a great sense of urgency to increase sales” in areas like the home and apparel categories, which are more profitable, CFO Brett Briggs said on the call. A case in point, on Walmart.com, Ellen DeGeneres’ new exclusive fashion line, EV1, was featured at the top of the home page. Also prominently showcased was Walmart’s new furniture and home furnishings line MoDRN.

Walmart’s $16 billion purchase of the Indian online retailer Flipkart remains a point to watch. With India reportedly having begun to forbid foreign companies like Walmart and Amazon to sell their own products through their affiliated entities in the country—where both retailers have placed big bets—the potential Flipkart impact was a key discussion point on the conference call. Briggs said that while there was “some disruption to business,” Walmart doesn’t “currently expect there’ll be any significant impact.”