Walmart plans additional investments in e-commerce and employee wages after a large jump in revenues during the coronavirus pandemic
New York (AFP) - Walmart reported another round of strong sales Thursday amid the coronavirus pandemic as it announced significant investments in higher employee wages and technology for growing e-commerce demand.
The retail giant, which has become a one-stop shop for many consumers during the pandemic, said the new investments will bolster delivery and curbside pickup programs connected to e-commerce and lift wages for some 425,000 US workers.
But shares fell sharply on the announcements, which included a disappointing fourth-quarter loss and a forecast for slower US sales growth and slightly lower profits in the coming year.
“Our business is strong, and we’re making it even stronger with targeted investments to accelerate growth,” said chief executive Doug McMillon in a press release.
Walmart reported a fourth-quarter loss of $2.1 billion from the accounting for asset sales, compared with profits of $4.1 billion in the year-ago period.
Revenues rose 7.3 percent to $152.1 billion as the company pointed to a bounce from a strong holiday shopping season and a lift from a fresh US government stimulus package enacted at the end of 2020.
For all of 2020, Walmart reported profit of $13.5 billion, down 9.8 percent. Annual revenues jumped 6.7 percent to $524 billion.
- ‘Essential’ store -
Designated as an “essential” store as a venue for groceries and other consumables, Walmart was among the beneficiaries from coronavirus shutdowns in the spring when other retailers were forced to close.
Sales soared throughout the year even as Walmart struggled at times to keep up with demand for at times unexpected items, such as bandanas, which were used earlier in the pandemic as face masks.
Throughout 2020, Walmart hired more than half a million people, including new staff to deliver items and interface at curbside with customers, and other workers to fill in for those on leave.
At a presentation to Wall Street analysts, Walmart executives said they planned new investments on automation and supply chain improvements.
“This year just really fast-forwarded things in terms of customer behavior,” McMillon said. “We think the vast majority of that behavior is going to last.”
McMillon said the spending would boost e-commerce offerings and the attractiveness of “Walmart +,” a subscription plan that includes grocery delivery and is a rival to Amazon’s “Prime” service.
Walmart projected capital spending of $14 billion in fiscal 2022 compared with $10.3 billion in the year that just ended.
Neil Saunders, an analyst at GlobalData, said a weakened profit outlook in light of the spending was inevitable.
“Such expenditure is necessary, especially in areas like automation which will yield long term savings, so this is a case of some mild short term pain for a long term gain,” Saunders said in a note.
- Higher minimum wage? -
The wage increases will lift Walmart’s US employee average wage to above $15 per hour.
However, Walmart did not alter its national minimum wage – currently $11 an hour – which partly reflects the difference between high- and low-cost regions in the US.
About 730,000 of Walmart’s 1.5 million US employees will make at least $15 an hour with the latest change.
President Joe Biden and congressional Democrats have championed legislation to boost the US minimum wage to $15 an hour from the current $7.25 an hour.
However, the fate of the proposal is uncertain. Republicans so far oppose the plan and even some Democrats have balked at the size of the increase. Some experts have also said the wage hike should take into account regional cost-of-living.
McMillon, in response to an analyst question, said Walmart wanted to maintain its system of promoting workers and that much of the staff that will benefit from the newest increase are company veterans.
“We’re trying to move that average up, to create that ladder and continue to have associates that come through our system and become store managers,” McMillon said.
“We’re obviously really well aware of what’s happening nationally with this discussion around $15 and think that’s an important target,” McMillon said. “But I also think that should be paced in a way that’s good for the US economy and you can kind of see us as a model.”
Shares fell 6.5 percent to $137.66.