Walmart: Expectations of High Returns and Investing in Flipkart

Wall Street expects Walmart to report strong fourth-quarter earnings on Tuesday, but investors are eager for more details on the performance of the world’s largest retailer during the 2018 holiday shopping season and the status of its investment in Flipkart.

While experts had predicted a potentially record shopping period between Thanksgiving and Christmas, expectations were tempered earlier this month when Commerce Department data showed a 1.2 percent drop in retail sales in December, the largest decline since September 2009. Still, investments by Walmart (WMT) in new checkout technology and other store improvements, along with an expanded toy selection, is likely to have led to strong sales for the Bentonville, Arkansas-based retailer, according to analysts at Robert W. Baird & Co.

“CEO Doug McMillon's bold strategy to reshape WMT into a more nimble, fully integrated omni-channel retailer has generated real momentum across the business at a time when many traditional retailers are losing relevancy with consumers,” senior research analyst Peter Benedict wrote in a recent note.

Walmart’s e-commerce sales are expected to continue to balloon, while overall comparable sales are expected to rise as much as 3 percent.

Meanwhile, investors are also eager to get an update on Walmart’s $17 billion acquisition of India e-commerce giant Flipkart. While the country’s online shopping market is expected to top $200 billion by 2028, new regulations preventing Walmart and rival Amazon from offering lucrative deals on its products to draw customers could make the journey more difficult.

Flipkart CEO Kalyan Krishnamurthy reportedly warned the Indian government that the crackdown is causing the firm to “divert significant resources” toward compliance and warned it could lead to “significant customer disruption” if the deadline is not extended. Despite that request, the rules took effect on Feb. 1.

While Walmart is investing heavily in new technology for its stores, some of its signature ventures have already failed – raising concerns that it could be losing ground in the battle against Amazon. The company in early February ended its partnership with Deliv for a same-day grocery delivery service. Walmart still partners with delivery companies like DoorDash and Postmates.

Wall Street expects fourth-quarter earnings per share to rise 0.3 percent to $1.33, according to Refinitiv, on sales of $138.65 billion, a 1.8 percent gain on the year-earlier period. In the third quarter, sales grew 2.4 percent to $126.1 billion, while profits declined slightly to $1.7 billion, or 58 cents per share.