Walmart will reveal this week how it fared in its battle with Amazon for Christmas shoppers’ dollars, with some on Wall Street expecting the retailer will report its weakest profit margins in years alongside rising sales.

Despite government data last week that showed US retail sales in December fell the most since 2009, like-for-like revenues at the country’s biggest retailer were expected to have risen about a fifth faster in its crucial fourth quarter than a year ago.

But the results from the supermarket juggernaut, which operates more than 11,200 stores worldwide, are also expected to show how the investments it is making to better compete in the digital era are weighing on profitability.

“It takes spending when you’re competing, long term, with Amazon,” said David Schick, managing partner at Consumer Edge Research. “These are investment heavy initiatives.”

Rising transport and labour costs are adding to bottom line pressure on Walmart, which employs more than 2.2m people. The company is giving truckers a raise to almost $90,000 on average in an effort to attract hundreds of drivers for its delivery fleet. 

Gross margins are expected to have fallen to 23.9 per cent, according to broker estimates collated by S&P Capital IQ, which would be the weakest in at least eight years.

Doug McMillon, chief executive, has already put shareholders on notice that Walmart needs to invest and take risks as its seeks to “reimagine retail”.

Initiatives include grocery pick-up at more than 2,000 stores and a new delivery service in more than 35 US cities. Workers are being kitted out with handheld apps, and stores with automated shelf scanners.

Online, the company has relaunched Walmart.com and Jet.com, the New Jersey ecommerce site it bought for about $3bn in 2016.

Investors are counting on improved metrics from the online businesses, whose stuttering performance over the previous holiday season brought to the fore concerns about Walmart’s ability to compete with Amazon.

Like-for-like US sales are forecast to have risen 3.1 per cent in the three months to the end of January, according to S&P Capital IQ. That would mark a deceleration from the 3.4 per cent in the previous quarter but a recovery from the unexpectedly weak 2.6 per cent in the year-ago quarter.

Walmart’s earnings will be the latest in a series of mixed figures about the health of American consumers.

Wall Street is sceptical about the accuracy of the economic data last week that showed headline retail sales dropped 1.2 per cent month on month. Other figures have pointed to a strong labour market.

“If Walmart’s sales have done well it would kind of suggest that the government numbers are off,” said Neil Saunders, managing director at GlobalData Retail. “Walmart is a bellwether for the economy. It’s almost representative of how people are spending.”

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