Updated 4:09 p.m. ET Feb. 19
The passing of the torch was a smooth one at Walmart Inc. — with a nice shout out for the fourth-quarter fashion business from John Furner, the company’s new president and chief executive officer.
Investors were given pause by the retailer’s outlook for this year, which predicted some slowdown in revenue growth. Overall, though, Furner is starting on a solid footing and keen to lean in on the future.
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“Sales were strong across each segment of the business, and this includes sales of general merchandise, which grew on a global basis and was up low-single digits for Walmart U.S., led by fashion,” Furner told analysts on a conference call after earnings were released Thursday. “Fashion was a bright spot for us both in-store and online. Driving a healthier mix of sales growth in our business is important to the strategy overall, so I’m pleased with the trends we’re seeing.”
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Revenues for the fourth quarter increased 5.6 percent to $190.7 billion, an increase of 4.9 percent in constant currency. That gain was powered by a 24 percent increase in the global e-commerce business and a 37 percent advance in the still-nascent advertising business. Comparable sales at the flagship Walmart U.S. business rose 4.6 percent.
Furner, who led the U.S. business before stepping up to the top job, said the company continues to see the majority of its share gains from households making more than $100,000.
“For households earning below $50,000, we continue to see that wallets are stretched,” he said. “And in some cases, people are managing spending paycheck to paycheck. That said, even these households are emphasizing convenience nearly as much as price.”
Walmart’s net income — which took a hit from losses on equity and other investments — fell 19.4 percent to $4.2 billion for the quarter ended Jan. 31. But adjusted earnings per share rose to 74 cents, 1 cent ahead of the 73 cents analysts forecast, according to Yahoo Finance.
For the full year, Walmart’s revenues grew 4.7 percent to $713.2 billion with profits increasing 12.6 percent to $21.9 billion.
Those gains came under the watch of Doug McMillon, who stepped down after a 12-year run that saw him transform the massive brick-and-mortar retailer into a much more digital competitor prepared to take on Amazon.
It’s a tough act to follow.
This year, Walmart forecast sales would increase by 3.5 percent to 4.5 percent, although companies often set targets that end up being raised and analysts saw the outlook as cautious. Investors, in turn, signaled their own caution. Walmart’s stock slipped 1.4 percent to $124.87.
That pulled Walmart’s market capitalization down to $996 billion, below the landmark $1 trillion it hit earlier this month.
Furner is bullish that more growth is coming.
“When I look at the enterprise today, it’s a portfolio of businesses anchored in growth, especially our digital channels, with an emphasis on having inventory close to the customer to maximize our delivery speed,” he said. “Ultimately, what matters is how we show up for our customers and members. Did we serve their needs better today than we did yesterday? If so, we did our job. And how we approach getting better every day is what’s important to me. We do that by living our purpose and values. That won’t change. Our mission, to help people save money and live better, is as true today as it’s ever been. It guides the strategy we’ve outlined, and that strategy is clear, and we’re executing on it at a high level.”
Walmart has been steadily investing in technology as well as its supply chain — and shoppers are responding. For instance, the number of U.S. customers who took delivery of their orders in under three hours grew more than 60 percent last year.
“And we aren’t just embracing the tools that are changing the way people shop. We’re creating them,” crowed Furner. “We’re enhancing our shopping assistance, like Sparky, and building new experiences with partners like OpenAI and Alphabet that are shaping the future of agentic commerce.”
The CEO said customers who use the Sparky shopping agent have an order value that’s 35 percent higher.
“I love how Sparky perfectly fits within our omnichannel strategy,” he said. “It connects digital intent to fulfillment through forward deployed inventory and 1.5 million associates here in the U.S. When Sparky builds a basket, we execute it through fast delivery, pickup or in-store, turning AI engagement into immediate physical outcomes.”
While a lot of retailers are exploring agentic AI, Walmart is one of the few, alongside Amazon, that has the mega scale to really reap the benefits relatively quickly.
To wit, Moody’s Investors Service recently predicted that the retail sector, minus Walmart and Amazon, would see its earnings before interest and taxes fall by 1 percent to 3 percent in 2026.
“New AI-related applications are fueling innovation that is critical for sales and profit growth,” Moody’s said. “The gap will widen between thriving, surviving, and at-risk retail and apparel companies as technological change continues to disrupt business models.”
John David Rainey, Walmart’s chief financial officer, neatly illustrated the dynamic on the call when an analyst asked about the company’s e-commerce profitability.
“We’ve reached a point where we don’t even really talk about this internally anymore,” Rainey said. “We’ve far surpassed the breakeven level. We were profitable in each of the four quarters in the U.S. segment [last year], and the momentum is only upward from here.
“We’ve been enjoying roughly double-digit incremental margins in e-commerce. We don’t expect that to change,” he said. “We feel really good about the plan going forward. The nature of this business is you build a large digital platform and the marginal cost of growth is very low. You don’t have to continue to build that platform to achieve the next percentage point of growth. And so we’re enjoying the scale economics that come from a digital business. That’s not going to change.”
So the already big is set up to keep charging higher.
Rainey said the third-party online marketplace business saw fourth-quarter sales increase “north of 40 percent” in the cook and dine, fashion and home decor categories.