Walmart U.S. CEO calls 2020 a “historic, unprecedented” year
By BCN Executive Editor Wesley Brown — Feb. 18, 2021 — Bentonville-based Walmart Stores Inc., in reporting robust fourth quarter and yearly sales and ecommerce growth amid the COVID-19 pandemic, today announced plans to boost pay for more than 425,000 frontline associates above $15 per hour level.
“We completed a strong year and a strong Q4 thanks to our amazing associates. They stepped up to serve our customers and members exceptionally well during a busy holiday period in the midst of a pandemic,” said Walmart Stores President and CEO, Doug McMillon. “Change in retail accelerated in 2020. The capabilities we’ve built in previous years put us ahead, and we’re going to stay ahead. Our business is strong, and we’re making it even stronger with targeted investments to accelerate growth, including raises for 425,000 associates in frontline roles driving the customer experience.”
“Our associates responded unbelievably to serve customers in one of the most challenging times we’ve faced. We have tremendous momentum having just completed a year with record sales and operating cash flow,” added Walmart CFO Brett Biggs. “We accomplished this while accelerating our long-term strategy of transforming Walmart into a dynamic omnichannel business. It’s now time to accelerate even more.”
McMillion and Biggs made the announcement concerning the employee raises during the retailer’s annual virtual meeting for the Wall Street investment community. The big news was that the Arkansas retail conglomerate reported yearly sales of $559.2 billion, up 6.7% or $35 billion from a year ago.
For the period ended Dec. 31, however, Walmart reported adjusted earnings of $1.39 per share on operating income of $5.49 billion, eleven cents below its previous guidance. Total revenue in the fourth quarter was a record $152.1 billion, an increase of $10.4 billion. Wall Street analysts had expected the world’s largest retailer to post fourth quarter earnings of $1.50 per share, which led to a sale-off in early morning trading in New York.
Concerning the company’s lower profits during the all-important holiday shopping season, Walmart said the decision to repay property tax relief in the U.K. took a bite out of gross profits. The international retailer also took a $1.1 billion charge in the fourth quarter for COVID-19 related costs, company officials said.
Despite lower year-end profits, McMillion said his leadership team will build on its strong performance in fiscal 2021 and existing momentum with customers amid the ongoing pandemic. He said the company’s strong financial position and cash flow makes it the right time to accelerate investments in key areas, enabling it to grow faster while leveraging its unique assets to build a business model that will define the next generation of retail.
“This is a time to be even more aggressive because of the opportunity we see in front of us,” said McMillon. “The strategy, team and capabilities are in place. We have momentum with customers, and our financial position is strong.”
Besides the retailer’s strong sales growth, same stores sales at Walmart USA stores increased 8.6% with strength across most key categories, the company. In addition, Walmart’s ecommerce sales in the U.S. also jumped 69% with strong results across all channels. At the company’s Sam’s Club warehouse stores, same stores sales rose by 10.8% and online sales grew 42%.
Walmart International net sales were $34.9 billion, an increase of 5.5%. Net sales in constant currency increased 6.3%, led by Flipkart, Mexico and Canada. Changes in currency rates negatively affected net sales by approximately $300 million, the Northwest Arkansas retail giant said.
Minimum wage debate
The decision to boost pay for Walmart associates above $15 per hour comes as debate heats up in Congress for living wages for frontline COVID-19 workers, many who Black, Hispanic and struggling to make ends meet. After announcing the pay hike, Walmart’s average worker pay is more than doubles the current U.S. minimum wage of $7.25 per hour, although many states have backed voter referendums that have pushed minimum wage levels well above that amount. In Arkansas, for example, voters approved a referendum in 2018 to gradually raise minimum wages to $11 an hour by Jan. 1, 2021, which went into effect more than a month ago.
Under a Democratic proposal now floating in the U.S. House of Representatives, the nation’s minimum wage would be boosted to $15 per hour by 2025. At a press briefing on Feb. 16, White House spokeswoman Jen Psaki said the Biden administration was negotiating with U.S. Senate leaders for a possible minimum wage hike inserted in his $1.9 trillion stimulus package, which is headed for possible approval next week.
After raising pay for more than 160,000 Walmart associates on the frontline of the COVID-19 pandemic, Walmart Stores USA President and CEO John Furner sent a personal note to the company’s frontline employees with the news of the upcoming pay hike.
“In addition to running our already successful retail business, which takes a lot, you faced so many challenges that none of us could have predicted, and got customers the items they needed – however they wanted to shop for them,” said Furner. “You helped people feel safe, and many of you also played an invaluable role administering COVID-19 tests and now vaccines.”
On Feb. 12, Walmart and Sam’s Club pharmacies began administering COVID-19 vaccines through the Biden administration’s Federal Retail Pharmacy Program. More than 1,000 Walmart and Sam’s Club pharmacies in Arkansas and 21 other states are receiving federal vaccine allocations this week, with an emphasis on locations that reach customers in underserved communities with limited access to health care, company officials said.
Beginning on March 13, Walmart will raise pay for store associates in digital and stocking workgroups. Some 425,000 store associates in these frontline roles will receive a raise, with starting rates moving to $13 – $19 per hour, based on the store’s location and market, said Furner.
According to Walmart, nearly 230 million customers and members visit approximately 10,800 stores and clubs weekly in 25 countries and ecommerce websites. Across the globe, Walmart employs over 2.2 million associates worldwide.
Looking ahead, Walmart said it expected net sales, operating income and profit to decline in 2022, mainly due the sale its operations in Japan and the “duration and intensity of the COVID-19 health crisis globally, timing and effectiveness of global vaccines, the scale and duration of economic stimulus, employment trends and consumer confidence.” During the period, the retailer said it will invest around $14 billion with a focus on supply chain, automation, customer-facing initiatives and technology.
The disappointing 2022 guidance and substandard quarterly earnings results led to a huge sell-off of Walmart shares on Thursday. At midday, Walmart shares were trading down $7,86, or 5.3% at $139.35 on the New York Stock Exchange. With more than 20 million shares trading hands on Wall Street, Walmart and other key bellwether stocks pulled the Dow Jones Industrial down nearly 250 points, or 0.79%, to 31,363.98 at midday.
Walmart’s board of directors also approved an annual cash dividend for fiscal year 2022 of $2.20 per share, an increase of 2% from the $2.16 per share paid a year ago. The annual dividend payout of $2.20 per share will be paid in four quarterly installments of 55 cents per share, which amounts to more than $20 billion in pocketed earnings.
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