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Walmart said it expects to provide a more detailed financial forecast at its annual Investor Day in April.

Walmart U.S. Q4 comps up 8.3% amid strong food sales

Company cites economic uncertainty in issuing cautious guidance for year ahead

Walmart posted strong fourth-quarter sales on Tuesday but issued a cautious outlook for the year ahead, citing economic uncertainty and persistent dry grocery inflation.

Comparable-store sales in the U.S. rose 8.3%, excluding fuel, for the fiscal fourth quarter, which ended Jan. 31. For the full year, Walmart U.S. comp-store sales increased 6.6%, excluding fuel.

December was the largest sales month in Walmart U.S. history, the company said, and was largely driven by food sales growth in the “high teens.”

“We're gaining share across income cohorts, including at the higher end, which made up nearly half of the gains we saw in the U.S. again this quarter,” said Doug McMillion, CEO of Walmart, in a conference call with analysts.

He said the company’s ecommerce offerings and its Walmart+ membership program are attracting more higher-income shoppers and are expected to continue to do so.

McMillon also said shoppers have been increasingly shifting their purchases to grocery products and away from more discretional categories such as home an apparel. This shift represented a 300 basis-point shift in sales in the past year, he said, and it is having a negative impact on profit margins.

In food categories, the company said it saw growth in both traffic and basket sizes, which it said were “positive indicators.”

Meanwhile food categories have shown the most persistent inflation across the whole store, the company said. Inflation in dry grocery categories was up in the mid-teens in the fourth quarter, which was higher than anticipated, and it is expected to remain high at least in the near term. Inflation on fresh products has been more variable, with prices easing in some categories such as milk, eggs, and beef.

For the full year, Walmart is expecting U.S. comp-store sales growth to slow considerably, to a range of 2% to 2.5%, as a result of consumers being more cautious about their spending and uncertainty around the macro-trends in the overall economy. Consumers’ savings rates are dropping, for example, and auto-loan delinquencies are rising.

Despite the cautious outlook, Walmart said it is bullish on the gains from its ecommerce business, which grew 17% in the fourth quarter in the U.S.

During the last two years, store-fulfilled delivery sales have nearly tripled, and now total more than $1 billion a month, the company said.

The company is also seeing sales gains from its retail media network, where suppliers can advertise on the Walmart’s online channels. Advertising sales were up 41% in the fourth quarter, compared with a year ago.

The company is also optimistic about future gains from its investments in automation, said John David Rainey, chief financial officer. In the company’s perishables distribution centers, for example, automation is driving nearly 50% better-than-expected throughput in terms of cases per hour. At some ecommerce DCs, automation has reduced what was formerly a 12-step process down to five steps, he said.

Walmart said it expects to provide a more detailed financial forecast at its annual Investor Day in April.

Following are some year-end financial highlights:

• Walmart U.S. sales were up 8% for the fourth quarter, to $113.7 billion, and 6.9% for the year, to $420.6 billion. Operating income in the Walmart U.S. division rose 3.8%, to $5.4 billion, for the quarter, and was down 4.6% for the fiscal year, to $20.6 billion

• The company’s Sam’s Club division posted comp-store sales of 12.2% for the fourth quarter and 10.5% for the full year, both excluding fuel

• Walmart’s total revenues, which include U.S., international and Sam’s Club results, increased 7.3% for the quarter, to $164 billion, and 6.7% for the year, to $611.3 billion. Fourth-quarter consolidated net income rose 59.9%, to about $6.3 billion

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