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Walmart says that the coronavirus, which is causing many companies to shutter stores and cut back production, will likely affects its operations as well.
“Currently we do anticipate some financial impact to the China business’’ in the first quarter and potentially in the second, said Brett Biggs, Walmart’s Chief Financial Officer, during the retailer’s investors day in New York City Tuesday.
The first quarter impact could amount to a loss of a couple cents per share.
While Walmart is not currently having a problem with the shipping of its goods, a longer term disruption from the outbreak in China “could impact our business,’’ Biggs said.
The nation’s biggest retailer spoke about the coronavirus as it discussed how its sales took a hit from other international challenges, such as unrest in Chile, as well as a shortened holiday season.
Sales at stores open a year rose 1.9% in the quarter that ended Jan. 31, buoyed by strong growth in Walmart’s grocery services, and net sales internationally increased 2.3%.
But sales in the U.S. were weaker than expected, partly due to a holiday season that was six days shorter. And events overseas, including uncertainty about the United Kingdom’s exit from the European Union, also took a toll. Unrest in Chile affected the retailer’s international business, impacting operating income by roughly $110 million.
“The holiday season delivered positive transaction growth,” Biggs, said in the company’s initial earnings statement. “However, it wasn’t as good as expected due to lower sales volumes and some pressure related to associate scheduling. We understand the factors that affected our results and are developing plans to address them.”
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In the U.S., online sales increased 35% in the last quarter.
Walmart says that it’s not currently factoring the coronavirus into its forecast for the new year. But the outbreak, which has led to the deaths of more than 1,700 people, is impacting a variety of businesses, from McDonald’s, which has shuttered hundreds of locations in China, to Apple which says a slowdown in production will likely lead to iPhone shortages.
In the U.S. roughly 2/3 of Walmart’s merchandise is made here, while the rest of the goods are sourced from several other countries, including China.
”We don’t know what’s going to happen next, there are so many moving parts right now,’’ says Doug McMillon, Walmart’s president and CEO said. “How long would those shipments be delayed?’’
Those unknowns, he says, make “it really difficult to call how it will pay out in the quarter.’’
Walmart’s stock was down 1.09% to $116.60 a share in pre-market trading.
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