Walmart CEO Furner begins tenure with conservative outlook

By Juveria Tabassum and Aishwarya Venugopal

Feb 19 (Reuters) - Walmart's WMT.O new CEO John Furner kicked off his tenure with a coming-year forecast that fell short of analyst expectations on Thursday, even as online demand from U.S. customers looking for quick deliveries bolstered revenue in the holiday quarter.

Walmart is increasingly banking on its e-commerce business to drive growth in a diverging U.S. consumer environment, and analysts were expecting some caution in the company's annual projections as  Furner enters his first quarter at the helm.

The company expects net sales to grow 3.5% to 4.5% for the coming year, which is similar to its initial outlook for the year that ended, but was below analysts' estimates of roughly 5% growth, according to data compiled by LSEG.

Shares of the company, which also announced a fresh $30 billion buyback plan, reversed course from premarket losses to rise about 2% in early trading.

The stock has been a consistent outperformer, with gains of 22% over the last year that made it the first retailer to exceed $1 trillion in market value.

ECOMMERCE SHINES

Households earning more than $100,000 have been shopping more at Walmart's e-commerce platforms, and have been increasingly responsible for the company's market share gains over the past two years.

"In the U.S. we see the customers being choiceful in their spending ... for households earning below $50,000, we continue to see that wallets are stretched," Furner said on a post-earnings call.

However, shoppers using fast delivery in under three hours grew more than 60% for the year. "We're now known for ultra fast delivery times and providing convenience," Furner added.

Contribution to U.S. sales from e-commerce almost doubled in the quarter for Walmart, and overall revenue rose 5.6% to $190.66 billion, slightly ahead of expectations.

"Given (Walmart's) scale and infrastructure, it has even more opportunities to capitalize on e-commerce growth ... the company has the ability to really stand out in a sea of retailers," said David Silverman, analyst at Fitch.

Walmart has bucked broader weakness in consumer spending on higher-priced items that has plagued retailers such as Target TGT.N over the past two years, as its investments in its e-commerce business begin to pay off.

Walmart's U.S. online sales rose 27% in the quarter, its 15th straight quarterly double-digit increase. The new shoppers have helped boost sales of higher-margin items such as clothing, kitchen appliances, furniture and toys.

"The real issue this morning sits with the fact that Walmart's stock came into the earnings print at or near an all-time high, which makes the reaction function arduous at best," said Art Hogan, chief market strategist at B. Riley Wealth.

THE FURNER ERA

Markets have cheered Furner's appointment, following his leadership of Walmart's U.S. business through the pandemic and his efforts to adapt to AI‑driven changes ahead of rivals. Walmart's U.S. unit, now led by David Guggina, accounts for nearly 70% of its annual revenue.

 The company now faces the task of scaling higher‑margin revenue streams such as advertising, while maintaining store performance and margins. Its global advertising business surged 37% in the quarter.

Advertising income and membership fees represented nearly one-third of its operating income this quarter, executives said on a post-earnings call.

Walmart has also stayed largely unscathed from the impact of tariffs, given the retail giant's dominance in groceries and its ability to secure the lowest prices from suppliers, making it a popular choice for value-conscious shoppers.

U.S. same-store sales for the three-month period ended January 31 rose 4.6%, ahead of estimates of 4.2%.

Walmart expects adjusted earnings per share of $2.75 to $2.85 in fiscal 2027, below expectations of $2.96. The company's fourth-quarter adjusted earnings per share of 74 cents beat estimates of 73 cents.