What’s Going On Here?Walmart reported worse-than-expected earnings on Thursday, and investors didn’t think much of the retail chain’s service: its shares fell by their biggest one-day drop in almost a year (tweet this). What Does This Mean?Walmart’s been a literal one-stop shop for Americans throughout the pandemic, selling groceries, cleaning products, and plenty of other lockdown essentials. And that was just as true last quarter, when a fresh round of government checks encouraged shoppers to buy, buy, buy – driving record sales for the retail giant.
Still, online sales didn’t grow as quickly as the quarter before – and actually grew at their slowest rate since the outbreak, uh, outbroke. Walmart’s profit missed estimates too: the retailer’s costs climbed as it hired more employees to pick and pack online orders. It’s not sure things will improve either, telling investors to expect lower profits and slower sales growth this year. Why Should I Care?For markets: This retailer is changing with the times.
While Walmart’s anticipating a return to “normal” growth in 2021, it reckons its business has changed forever. For one, it's hoping to turn its newfound ecommerce momentum into lasting gains by investing more money in supply chains and automation. And for another, it's aiming to expand its reach by venturing into advertising, healthcare, and financial services. Both moves will cost serious money though – $4 billion more than last year, to be precise – and investors are skeptical they’ll pan out.
The bigger picture: Happy employees, happy business?
Walmart – America’s biggest private employer – also announced it’d be raising its workers’ average hourly pay to $15, coinciding with a wider push for a $15 federal minimum wage. As for what that means, it depends who you ask. For minimum wage workers on $7.25, it might be a game-changer. For investors, it might threaten their investments’ profits. And for economists – well, ask them and you'll get dragged into the age-old debate about whether it’d reduce poverty or jobs… | 