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General goods retailer Walmart Inc. (WMT - Free Walmart Stock Report) reported slightly worse-than-expected results for the fiscal fourth quarter ended January 21, 2020.

Total revenue of $141.7 billion rose 2.1% year over year, but fell 3.3% short of our estimate. Too, adjusted earnings per share of $1.38 were $0.03 below the year-ago figure. Same-store sales for Walmart U.S. were up 1.9%, missing the 3% mark Walmart had been forecasting. Increases in traffic and the average transaction amount were roughly the same.

Although the quarter started and ended strong, there was weakness in several general merchandise categories in the U.S. during the weeks before Christmas. A shorter holiday shopping season was partly to blame, and the company was also too aggressive on pricing. Sales of toys, media and gaming, and apparel were all weak. The soft sales volume, and some pressure related to employee scheduling, caused expense leverage to be less than anticipated. Specifically, a change to the attendance policy caused wages to be higher than they would have otherwise been. In response to the weak results, the company will be adjusting its apparel assortment and presentation in stores.

Meanwhile, the U.S. food and consumables categories remained elevated and e-commerce sales grew 35%. The International top line rose 2.2%, with strength in Mexico, China, and India, offset by continuing unrest in Chile and challenges in the U.K. due to Brexit.

Walmart's fiscal 2020 guidance calls for U.S. same-store sales growth of 2.5%. It expects the e-commerce business to expand around 30%, while international receipts will likely rise 4% in constant-currency terms. The company's earnings-per-share guidance range is $5.00-$5.15, which would reflect year-over-year growth of 1.5% to 4.5%. In response, we are reducing our $5.20 estimate by $0.10 to $5.10.

Although this was somewhat of a disappointing quarter for Walmart, we think the ongoing shift to an omni-channel shopping experience that leverages online grocery pickup and delivery positions the company well to thrive in an increasingly digital retail landscape. Conservative investors should consider these shares for their solid risk-adjusted long-term price appreciation potential.

About The CompanyWal-Mart Stores, Inc. is the world’s largest retailer, operating 3,522 supercenters (includes sizable grocery departments), 415 discount stores, 660 Sam’s Clubs, and 735 Neighborhood Markets in the U.S., plus 6,363 foreign stores (mainly in Latin America, with the balance in Asia, Canada, and the U.K.) for total square footage of 1.164 billion (as of 1/31/17). Most stores are owned and are within 400 miles of an expanding network of distribution centers. Groceries accounted for 56% of U.S. sales, while sales per square foot were about $420.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.