Dive Brief:

• Wal-Mart on Tuesday handily beat fourth quarter analyst expectations, thanks to boosts in store traffic and online sales. Q4 same-store sales (excluding fuel sales) grew 1.8%, beating the Consensus Metrix estimate for a 1.3% rise as the number of store visits rose 1.4%. U.S. e-commerce sales in the quarter rose 29%, adding 40 basis points to Q4 same-store sales.

• Q4 revenue rose 1% to $130.9 billion; excluding currency fluctuations, revenue in the quarter was $133.6 billion. Excluding items, earnings were $1.30 per share. Thomson Reuters I/B/E/S analysts expected on average earnings of $1.29 per share.

• Q4 consolidated net income attributable to Wal-Mart fell 17.9% to $ 3.8 billion from $4.6 billion in the year-ago period on a pullback from store openings. For the fiscal year ending on Jan. 31, net income attributable to Wal-Mart fell 7.2% from the year-ago period to $13.6 billion.

Dive Insight:

Wal-Mart’s results reflect its strong position as a low-price leader as holiday shoppers remained sensitive to prices, according to GlobalData Retail managing director Neil Saunders, who said that the retailer’s improvements to stores helped differentiate it as a destination beyond price.

“From our own store visits, the greater availability of associates was noticeable, and there was far more activity on the shop floor with demos and entertainment helping to improve conversion rates among shoppers,” Saunders said in a note emailed to Retail Dive. “As simple as these steps might be, they proved to be critical moves in terms of defending and growing share over the holiday season. We have always believed that Wal-Mart gets the basics of retailing right, and that it executes those basics well. This holiday season is a case in point.”

Still, the every day low prices (and its investments in e-commerce) have come with a cost: Gross margins declined by 8 basis points during the quarter — a “necessary evil" to Saunders. “Failure to deliver on the price front could have serious long term ramifications for the Wal-Mart business,” he said.

To capitalize on e-commerce growth, Wal-Mart must continue to improve its website in order to attract more online shoppers, an investment approach more akin to Amazon, which famously pours its profits back into its operations. Its acquisitions of upstart Jet, online footwear retailer Shoebuy and online outdoor retailer Moosejaw and its lower $35 free shipping threshold all bode well for the retail giant’s prospects. “[T]he year ahead is one of reinvention and investment and not of profit maximization,” Saunders said. “We believe this is the right strategy for continued long term dominance.”

Moody's Investors Service lead retail analyst Charlie O’Shea said the retailer's near-term investments are necessary to move assertively online. “[W]e believe Wal-Mart is continuing to generate critical and increasing traction online, with the current fiscal year another year of investment in this channel,” O’Shea said in a note emailed to Retail Dive. “As Jet.com becomes more fully-absorbed on multiple fronts, we believe Wal-Mart is well-positioned to assume a firm online leadership position among brick-and-mortar retailers.” 

While Wal-Mart will continue to be judged quarter by quarter, its long-term online prowess isn’t so secure, says Nick Egelanian, president of retail development consultants SiteWorks International. By contrast, Amazon is “on the 25-year plan” Egelanian told Retail Dive in an email.

“While I'm sure that Wal-Mart will have many moments that seem to impress Wall Street under these terms, I just don't see the company with a sustainable long term strategic plan at this point,” he said. “They are investing tens of billions into their internet operations while cutting back to near zero store growth. Why would the nation's low cost retail leader think it can beat Amazon in the high cost game of internet retail distribution, a game that Amazon has invested hundreds of billions of relatively free Wall Street money into without generating sustainable profits from its core ‘retail’ operations. Meanwhile, nimble competitors keep nipping at Wal-Mart's brick and mortar heals. Dollar General alone will open 1,000 stores this year.”