Walmart released its 4th quarter earnings report last week, and the numbers were a confirmation of the reality the company is facing: competing to keep the title of low cost leader comes at a price.
The earnings numbers painted a mixed picture. Total revenue rose 5.9%. And sales at US stores open for at least one year rose 1.5%…the second consecutive quarterly increase. Store traffic increased for the first time in two years.
But increased sales traffic came at the expense of profits. Lower holiday prices drew in consumers, but lower prices also meant that net income fell -15%. And margins are shrinking, and will continue to be squeezed as the company continues to cut prices in the coming months.
Walmart’s annual dividend yield of 2.5% is met by the reality that the stock is down -1.6% so far this year…while the market is up 8.96%. Walmart accounts for 10% of non-automotive spending in the US… but when getting more product out the door cuts profits and pressures margins, there’s a problem. Because of that, I don’t look at the recent sell-off as a buying opportunity. I look on it as a reminder that this stock has managed to go nowhere over the past decade.