Walmart Says It’s Not Lowering Forecast Because of Coronavirus

on Feb19
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Walmart said on Tuesday that while it continued to monitor the coronavirus outbreak in China and around the world, the company was not lowering its sales forecast for this year.

The world’s largest retailer released the announcement with its fourth-quarter earnings, one day after Apple warned of a slowdown. Apple had said its supply of iPhones was hampered because the factories in China where they are made were not resuming production as quickly as expected. Apple also said demand for its smartphones in China had been hurt because the virus outbreak had forced the company to close all 42 of its stores.

At an investor conference on Tuesday morning in New York, Walmart executives said sales at the company’s 430 stores in China had not faltered, even during the quarantine, as customers turned to the retailer to buy food and necessities. Walmart is also invested in a grocery delivery venture in China that has continued to make home deliveries during the outbreak.

Still, the company’s chief financial officer, Brett Biggs, cautioned that the coronavirus situation was still too “fluid” to make any definitive pronouncements about how it could play out for Walmart. Mr. Biggs said it was possible that the fallout from the virus could have a “couple of cents negative impact” on earnings per share in the coming quarters.

  • Updated Feb. 10, 2020

    • What is a Coronavirus?
      It is a novel virus named for the crown-like spikes that protrude from its surface. The coronavirus can infect both animals and people, and can cause a range of respiratory illnesses from the common cold to more dangerous conditions like Severe Acute Respiratory Syndrome, or SARS.
    • How contagious is the virus?
      According to preliminary research, it seems moderately infectious, similar to SARS, and is possibly transmitted through the air. Scientists have estimated that each infected person could spread it to somewhere between 1.5 and 3.5 people without effective containment measures.
    • How worried should I be?
      While the virus is a serious public health concern, the risk to most people outside China remains very low, and seasonal flu is a more immediate threat.
    • Who is working to contain the virus?
      World Health Organization officials have praised China’s aggressive response to the virus by closing transportation, schools and markets. This week, a team of experts from the W.H.O. arrived in Beijing to offer assistance.
    • What if I’m traveling?
      The United States and Australia are temporarily denying entry to noncitizens who recently traveled to China and several airlines have canceled flights.
    • How do I keep myself and others safe?
      Washing your hands frequently is the most important thing you can do, along with staying at home when you’re sick.

The virus’s impact on Walmart’s supply chain is also uncertain, but the retailer’s executives suggested that the effect could be more muted than at other companies.

If the coronavirus continues to idle factories over the next few months, Walmart said there could be some “impact on shipping.” But Walmart also stressed that two-thirds of the products it sells — which now consist primarily of food — are sourced from the United States. The other third comes from countries like China, other parts of Asia and Mexico.

Walmart declined to specify how many of its goods were made in China, but Wells Fargo analysts recently estimated that 15 percent of its merchandise came from that country. Other retailers, like Target and Best Buy, have much higher exposure to Chinese manufacturing.

Walmart was one of the first American companies to source its merchandise in China. But as the Chinese economy has evolved, the cost of manufacturing there has increased, prompting companies like Walmart to source their goods in less costly countries.

China’s importance is its consumers. Walmart opened its first store there in 1996. Although its network of stores in China is not as large as its footprint in other markets, Walmart has made big investments in online shopping in the country.

Walmart owns a minority stake in, one of China’s leading e-commerce players. The two companies recently invested together in a grocery delivery start-up. Walmart said on Tuesday that its assumptions of the value of its equity stake in JD had not changed.

Analysts who gathered for Walmart’s investors’ day in New York seemed to shrug off concerns about China, focusing instead on the company’s lackluster results in the fourth quarter.

Walmart said its holiday sales were “a little softer than expected,” leading to a rare miss of its revenue and sales targets in its most recent quarter.

The retailer said its same-store sales in the United States grew 1.9 percent during the quarter, which ended Jan. 31. That was lower than the 2.3 percent that Wall Street analysts had expected. The company’s adjusted earnings per share of $1.38 were less than the $1.43 it had forecast, while revenue was $141.7 billion, slightly less than Wall Street’s expectation of $142.5 billion.

The company blamed its disappointing results on political turmoil in Chile, as well as “softness” in a few general merchandise categories in its United States stores.

“Sales leading up to Christmas in our U.S. stores were a little softer than expected,” Doug McMillon, chief executive of Walmart, said in a statement.

The one bright spot in the quarter was record sales growth in e-commerce of 35 percent. The company’s shares were up 1.5 percent at the close of trading on Tuesday.

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