Walmart (WMT -1.21%) is scheduled to report fiscal 2022 fourth-quarter earnings on Feb. 17. Since the pandemic began, the international retailer has benefited as folks spend more on goods and less on services. However, new challenges have arisen in recent months as economies have started reopening.
One of those challenges is pressure on the labor force. After all, the coronavirus is still circulating aggressively; employees who have been infected or who have had close contact with someone who tests positive for COVID-19 may miss work for one or more weeks. So far, Walmart has dealt with most challenges since the outbreak with skill. When the company reports Q4 results, it can be another opportunity to demonstrate its merchandising prowess.
Walmart is ready to serve the rising consumer demand for goods
Interestingly, the fourth quarter will contain sales results from the holiday season. This is typically Walmart's highest-revenue quarter of the year. Of course, to prepare for the increase in demand, Walmart needs to secure enough inventory. In that regard, as of Oct. 31, the company held $57.5 billion of inventory. That's up from the $51.8 billion it had the same time the year prior. Note Walmart's increase in inventory is more significant than it appears on the surface. That's because, between Q3 fiscal 2021 and Q3 fiscal 2022, the company sold its businesses in the U.K, Japan, and Argentina. So, it has more inventory serving fewer customers.
Securing products to sell has been no easy feat in recent times. Since the onset of the pandemic, a broad selection of businesses has reported shortages stemming from supply chain disruptions. Walmart's ability to keep its shelves stocked demonstrates its merchandising skill and advantages of scale. That will all come to the forefront when Walmart reveals Q4 figures.
In the previous quarter, ended Oct. 31, comparable-store sales, which exclude the impact of store openings and closings, increased by 9.2% in the U.S. from the same quarter the year before. That's a meaningful increase in customer spending. To put that growth into better context, consider that Walmart has grown revenue at a compounded annual rate of just 2.9% in the past decade. Sure, billions of people have gotten vaccinated against COVID-19 and are going out more often than during the initial, more acute phase of the pandemic. Still, consumer spending has remained skewed in favor of goods over services. For a business the size of Walmart, that has meant revenue increased by over $35 billion from 2020 to 2021.
What this could mean for Walmart investors
Analysts on Wall Street expect Walmart to report revenue of $151.47 billion and earnings per share of $1.49. If it meets those projections, it would be a decrease of 0.4% and an increase of 7.19%, respectively, from the same period the year before.
Walmart's stock has been down 6.7% in the past three months. The market is undoubtedly concerned about supply chain shortages and how the resulting rising costs will affect Walmart's revenue and profits in the near term. If Walmart can show resilience amid these challenges, it could convince Wall Street that it has the leverage to secure the inventory it needs at favorable prices.