Walmart’s online growth slows in Q4 as earnings miss mark
Walmart reported mixed results for its fourth quarter as promotional activity and ongoing investments in its digital operations took a toll on earnings, and online growth slowed dramatically from the previous quarter.
The nation’s largest retailer reported net income of $2.17 billion, or 73 cents a share, in the quarter ended January 31, down from $3.76 billion, or $1.22 cents per share, in the year-ago period. Excluding one-time items that included restructuring charges and an impact from a one-time bonus to employees, Walmart earned $1.33 a share, four cents short of analysts’ estimates.
Neil Saunders, managing director, GlobalData Retail, said he was not overly concerned about the slump in net income because Walmart remains comfortably profitable, and because much of the deterioration is down to the various investments Walmart is making in future-proofing its business.
“We applaud this long-term view, especially as it is now being coupled with some rationalization and streamlining initiatives,” Saunders said.
Walmart’s same-store U.S. sales rose 2.6%, the 14th consecutive quarterly increase, and higher than projected. Same-stores sales at Sam’s Club division increased 2.4%.
Total sales increased 4.1% to $136.3 billion, topping Wall Street projections, amid a 1.6% rise in traffic at U.S. stores and a 1% increase in average ticket value. Online sales grew 23%, compared to a 50% increase in the prior quarter. The retailer said its online slowdown was expected as sales growth on Jet.com, which it acquired in 2016, cooled. It also cited operational snags related to inventory replenishment.
“The majority of this slowdown was expected as we fully lapped the Jet acquisition as well as creating a healthier long-term foundation for holiday,” stated Walmart CEO and president Doug McMillon. “A smaller portion of the slowdown was unexpected, as we experienced some operational challenges that negatively impacted growth.”
McMillon noted that, overall, the chain finished the year with e-commerce sales growth of more than 40%. “So, we feel better about the year than the quarter,” he said.
Hannaford enables purchase of mobile blood drive bus for Red Cross
Ahold Delhaize’s Hannaford banner, a longtime community partner with the American Red Cross, recently provided a gift through the Hannaford Charitable Foundation that allowed the Maine chapter of the Red Cross to purchase a new “bloodmobile” to help meet blood drive needs statewide.
The new vehicle, which has the capacity to take five donors at a time, replaces an older one that was driven an average of 1,800 miles a month and collected about 6,000 units of blood annually. That’s nearly 10% of the amount collected in Maine each year at 2,000 Red Cross blood drives.
“We expect the new, more efficient bloodmobile will spend approximately 19 days each month on the road and be able to collect an average of 25 units per stop,” Ann Kim, Red Cross spokesperson, said.
Guiding Stars Licensing Company Director Jim McBride, who helps coordinate a quarterly blood drive at the Hannaford support office says many potential donors throughout Maine can’t make it to larger community drives for various reasons. “A bloodmobile can bring the opportunity to donate right to their doorsteps,” McBride said.
The vehicle also will enable the Red Cross to hold smaller drives in outlying towns that might not have a good facility for a conventional community drive. This includes setting up in the parking lots of Hannaford stores throughout the state.
“Without the generosity of our donors, the Red Cross would not be able to fulfill its humanitarian mission,” Kim said. “We are so grateful for Hannaford’s support.”
Albertsons to acquire Rite Aid, go public
For perhaps the second time in his long career, Bob Miller may be a white knight for Rite Aid shareholders. Albertsons has agreed to merge with Rite Aid as part of a $24 billion deal that will take the privately-held grocer public.
“The hallmark of Albertsons Companies’ business has been to become the favorite local supermarket of our customers,” Miller, current Albertsons chairman and CEO who led a turnaround at Rite Aid in the early 2000s, said. “We have always put our customers first, and our combination with Rite Aid will enable us to even better serve the valuable pharmacy customer by providing a fully integrated one-stop-shop for our customers’ food, health, and wellness needs. I have long known the excellent management team at Rite Aid, and we share a singular focus on superior customer service and a clear vision and strategy to become the favorite local supermarket and pharmacy to shoppers in every neighborhood we serve.”
Current Rite Aid chairman and CEO John Standley will become CEO of the combined company, with current Albertsons’ Miller serving as chairman. The combined company is expected to be comprised of leadership from both companies and will be dual headquartered in Boise, Idaho, and Camp Hill, Pa. The companies said the name of the combined company will be determined by transaction close.
“This powerful combination enables us to become a truly differentiated leader in delivering value, choice, and flexibility to meet customers’ evolving food, health, and wellness needs,” John Standley, chairman and CEO, Rite Aid, said. “The combined platform positions Rite Aid to capitalize on our pharmacy expertise and expand and enhance our pharmacy footprint. We are confident that delivering improved customer experiences and value will drive growth and profitability while creating compelling long-term value for shareholders.”
The integrated company will operate approximately 4,900 locations, 4,350 pharmacy counters and 320 clinics across 38 states and Washington, D.C., serving more than 40 million customers per week. Most Albertsons pharmacies will be rebranded as Rite Aid, and the company will continue to operate Rite Aid standalone pharmacies.
The companies said the combination is expected to leverage a strong pharmacy network and Rite Aid’s PBM, EnvisionRxOptions, to drive significant customer growth. The Albertsons/Rite Aid combo will be positioned to drive incremental growth by deepening existing relationships and expanding reach across higher-value pharmacy customers. This will be achieved, according to an investor presentation, through a full suite of health-and-wellness capabilities, including specialty pharmacy offerings and in-store RediClinics in larger Albertsons Companies stores and stand-alone Rite Aid stores. In addition, investing in preferred relationships with EnvisionRxOptions, other PBMs, and regional payors is expected to drive prescription growth.
The new company — which is expected to be traded on the New York Stock Exchange following the close of the deal — also will have an expanded footprint and be ranked first or second in 66% of the top metropolitan areas in the United States and will be ranked first or second in 70% of pharmacy locations. It will establish the leading integrated food, health and wellness retailer on the West Coast and will have a strong brand position in the Northeast.
Other benefits associated with the proposed merger include:
- Leveraging loyalty programs and data to drive growth and find new customers. The new company will capitalize on enhanced data and analytics to unlock profitable growth through new customer acquisition, new merchandising programs, and demand forecasting, Albertsons and Rite Aid said. It also will create cross-branded opportunities for its loyalty programs, which currently have a combinedbase of 25 million active participants;
- Bringing manufacturing and distribution to bear on own brands. Combining Albertsons’ billion-dollar private-label brands — which include O Organics and Lucerne — and its manufacturing and operating capabilities, with such Rite Aid health-and-wellness own brands as B4Y and Daylogic, as well as its pharmacy expertise, will allow the combined company to drive growth opportunities and efficiencies across its purchasing, marketing, manufacturing, and merchandising functions, the companies said; and
- Strong omnichannel capabilities. The two companies’ expanding omnichannel platform will provide customers with convenience, choice, and flexibility through multiple in-store formats, digital channels, and same-day food and prescription delivery options from stores and via Drive Up & Go.
Under the terms of the agreement, in exchange for every 10 shares of Rite Aid common stock, Rite Aid shareholders will have the right to elect to receive either one share of Albertsons common stock plus approximately $1.83 in cash or 1.079 shares of Albertsons stock.
Depending upon the results of cash elections, upon closing of the merger, shareholders of Rite Aid will own a 28% to 29.6% stake in the combined company, and current Albertsons shareholders will own a 70.4% to 72% stake in the combined company on a fully diluted basis. Immediately following completion of the merger and assuming that all Rite Aid shareholders elect to receive shares plus cash, Albertsons will have approximately 392.9 million shares outstanding on a pro forma and fully diluted basis.
Albertsons is backed by an investment consortium led by Cerberus Capital Management, which also includes Kimco Realty Corporation, Klaff Realty, Lubert-Adler Partners and Schottenstein Stores Corporation.
The board of directors will be comprised of nine directors, four of whom will be named by Albertsons (including Bob Miller and Lenard Tessler, vice chairman and senior managing director at Cerberus), four of whom will be named by Rite Aid (including John Standley) and one of whom will be a jointly selected director.
A majority of the board will be independent. Lenard Tessler will serve as lead director.
The transaction has been approved unanimously by the boards of directors of both companies. The merger is expected to close early in the second half of calendar year 2018, subject to the approval of Rite Aid’s shareholders, regulatory approvals and other customary closing conditions.