Walmart Inc on Thursday said profit margins during the first quarter remained under pressure due to price cuts and higher freight costs, weighing on its shares even as sales and earnings came in stronger than expected.
Walmart’s gross margin, which has fallen for four consecutive quarters, was down 23 basis points in the quarter ended April 30. Within the US division, operating income fell 3.1 per cent from the prior year.
The weak margins overshadowed strong first-quarter results and progress in Walmart’s efforts to keep pace with rivals like Amazon.com.
The e-commerce rebound comes after a sharp slowdown during the crucial holiday quarter, which sent its shares down over 10 per cent and wiped out $31 billion from its market capitalisation.
“Online grocery continued to accelerate and we also have new brands in e-commerce including the partnership with Lord and Taylor, so there are a lot of different things driving growth there," Chief Financial Officer Brett Biggs said in an interview. He said free two-day shipping boosted growth, and the Walmart.com site redesign helped late in the quarter.
The company said its $16 billion investment in Flipkart may negatively impact its earnings per share (EPS) by $0.25-0.30 in fiscal year 2019, even though it remains “excited about what the future holds” in the fast growing Indian e-commerce space. “The company's investment in Flipkart... is expected to negatively impact fiscal year 2019 EPS by approximately $0.25 to $0.30 if the transaction closes at the end of the second quarter,” Walmart said in its earnings statement.
Shares of the world’s biggest retailer traded 1.6 per cent down in afternoon trade after initially opening higher. The stock has fallen around 20 percent from an all-time high in January.