Walmart has issued caution over the year ahead as consumers pull back on spending amid persistent inflation and potential economic downturn.
The warning comes in spite of a strong Q4 that saw the retail giant grow its revenues by 7.3 percent, reaching $164 billion. Full-year revenues were up 6.7 percent to hit $611.3 billion.
Growth for the quarter was driven by 41 percent YoY increase in advertising sales, bolstered by its retail media network. For the full year, Walmart’s advertising business grew almost 30 percent to reach $2.7 billion. Ecommerce represents more more than 13 percent ($80 billion) of total sales, the company said, making retail media a core part of its omnichannel offering.
But Walmart was downbeat in its outlook for 2023, citing high prices and macroeconomic uncertainty. “We don’t know what happens to consumer spending,” said Walmart EVP & CFO John David Rainey. “We don’t know what happens to layoffs, household income. And so, given that we’re so early into the year, and there’s a lot of unknown unknowns right now, we’re simply taking a cautious outlook.”
The retailer forecast enterprise sales growth of 2.5-3 percent, a shortfall from the company’s average annual sales growth of 6 percent over the past five years. Its trepidation is noteworthy given the company’s status as a bellwether for the retail industry.
In navigating these looming challenges, Walmart said it would invest in data and its advertising platform. “We’re working in partnership with our suppliers and sellers to use data-scaled fulfillment capabilities and our rapidly growing ad platform to elevate inventory accuracy and in-stocks, lower the cost to serve, and drive improved conversion,” said Rainey. “All of this improves the trajectory of our ROI and our margin profile.”
The company noted that the growth of its ecommerce business places it on surer footing that during previous economic downturns. “We now have a more compelling offer, a true omnichannel experience that makes us optimistic that more higher-income families will continue shopping with us across categories because we have pickup, delivery, and membership,” said Walmart CEO Doug McMillon.
As a self-proclaimed “tech-powered omnichannel retailer”, the firm looks to be competing with Amazon by breaking down the barriers between its in-store and online offerings. “It’s becoming more difficult to measure the differences in ecommerce and stores because stores are acting as fulfillment centres at times,” said Walmart US President and CEO John Furner. “There are a lot of blurred lines between all these channels.”