Dive Brief:

• Walmart revenue in the fourth quarter rose 2.1% year over year to $141.7 billion. In the U.S., comparable sales were up 1.9% and e-commerce grew 35%. Comps at Sam's Club rose 0.8%.
• Operating income in Q4 shrank 12.3% to $5.3 billion, with U.S. operating income down 12.7% to $4.4 billion. Walmart's U.S. comp growth of 1.9% missed the analyst consensus of 2.4%, according to Seeking Alpha.
• For the fiscal year, Walmart's revenue rose 1.9% to $524 billion, while comps in the U.S. rose 2.8%, e-commerce grew 37%, and Sam's comps rose 0.7%.

Dive Insight:

Walmart joined Target in capping off a relatively booming year with a Q4 that disappointed executives and investors. 

In a presentation, the company identified toys, apparel, and media and gaming as categories with underperforming sales, while grocery, health and wellness, home and electronics all performed well. CFO Brett Biggs​ also noted in a statement "solid" sales growth through Cyber Monday as well as in January.

Moody's lead Walmart analyst Charlie O'Shea described retailer's Q4 performance as "tepid overall," adding that it indicates "the Holiday season was if anything even more promotional than we anticipated." O'Shea also noted that variation in category performance — with low-margin food performing well while high-margin apparel did poorly — hurt the retailer's operating margins. 

"In addition, competition from Amazon heated up across multiple categories as its spending initiatives further heightened promotional activity as it drove sales above management's forecast, though in doing so it 'sacrificed' around 150 bps of margin for the quarter," O'Shea said.

CEO Doug McMillon said at an investor event Tuesday that the company was working to improve its apparel assortment after Q4, noting that weakness in the category came from a focus on in-store opening price points and offering too much Christmas-related seasonal apparel. That said, McMillon noted apparel sales are growing online and he sees an opportunity for Walmart there.

Overall, Walmart executives projected optimism about the company's trajectory. Biggs described the retailer's "underlying profitability" as healthy and said at the investor event that the company's investments were "paying off," as evidenced by lower employee turnover, digital growth and private brand growth. Executives also indicated that Walmart would hone in on price investments (another way of saying cutting or holding down prices). 

Neil Saunders, managing director of GlobalData Retail, said in emailed comments that, despite the softened Q4 sales, Walmart's results were "nonetheless respectable and reflect a proposition that remains relevant to consumers."

"Despite a reasonable headline number, it is fair to say that unlike past quarters Walmart was not firing on all cylinders during the last part of the year," Saunders added. He also noted that soft toy sales were "largely outside of Walmart's control as the whole industry suffered from a lack of 'must have' products, considerable competition as everyone crowded into the category, and deflation across many lines." 

And while apparel as a category had its own struggles in Q4, Walmart's offer was "uninspiring, difficult to shop, and did very little to stimulate the consumer," Saunders said. "All that said, we are not overly concerned with Walmart's position," he added. "The company is right to invest in online growth and the decline in margins from doing so is the cost of remaining relevant."