Walmart’s fourth quarter earnings fell below Wall Street’s expectations on Thursday as the retailer looks to convert the strength of its e-commerce business into lasting momentum and higher profits through increased investments during the pandemic.

In premarket trading, stocks are down nearly 5% as investors reacted to the retailer’s warning that sales are expected to be modest this year. Earnings per share will decrease slightly, but will remain unchanged after the exclusion of sales.

In the last quarter, Walmart’s US e-commerce sales rose 69% – a large number, but the slowest growth rate since the global health crisis began. Revenue from the same store in the US increased 8.6%, above the 5.8% increase expected by a StreetAccount survey. Subsidiary Sam’s Club also saw low single-digit sales growth in the same business excluding fuel and tobacco.

The big box retailer has benefited from pandemic trends as Americans buy more groceries, cleaning products, and other essentials. There was a boost in the fourth quarter as many customers issued their stimulus checks.

But the pandemic has also increased operating costs. In the fourth quarter, Walmart announced that the Covid-related costs were $ 1.1 billion.

Doug McMillon, CEO of Walmart, said the company is stepping up its investments to adapt to the significant changes in retailing over the past year. He said it will also raise US workers’ wages and raise the average hourly employee to over $ 15 an hour.

“This is a time to be even more aggressive because we see the opportunity we have before us,” he said in a press release. “The strategy, the team and the skills are there. We have momentum with customers and our financial position is strong.”

Stimulus increased sales

For the three months ended January 31, Walmart posted a loss of $ 2.09 billion, or 74 cents per share, compared to earnings of $ 4.14 billion, or $ 1.45 last year. The company said a loss in the UK and Japan reduced earnings by $ 2.66 per share, which was partially offset by earnings of 49 cents per share on equity investments.

Without these and other items, Walmart made $ 1.39 per share due to a lack of analyst estimates.

Total revenue increased 7.3% to $ 152.1 billion from $ 141.67 billion last year Wall Street’s expectations of $ 148.30 billion.

Membership Warehouse Club, Sam’s Club, saw sales growth of 8.5% excluding fuel and tobacco. Membership Warehouse Club e-commerce sales increased 42%.

CFO Brett Biggs told CNBC that the company could get another boost if the government approves a new round of stimulus payments.

“When the money hits we see spending go up pretty quickly, and I would expect to see something similar if we get another round of incentives that are obviously being discussed,” he said.

Sales growth in e-commerce is slowing

However, the slowing pace of the e-commerce growth rate points to some challenges that will be addressed by the tailwind from global trends of the health crisis. More and more Americans are getting Covid-19 vaccines and are able to spend their budget in other ways, such as B. going out for dinner or filling up the gas tank on the way back to the office.

Walmart is also under pressure to turn thriving parts of its business into money makers. Online services that have grown in popularity, such as roadside collection, require additional manpower when employees pick up and package orders. This translates into higher labor costs that Walmart has not passed on to its customers, even if more benefit from the convenience of online shopping.

Walmart’s e-commerce business has seen dramatic growth but is still not making a profit. However, according to Biggs, ecommerce margins continue to improve.

Walmart plans to spend $ 14 billion on investments this fiscal year, from $ 10 billion to $ 11 billion as it invests in supply chain, automation, and ways to improve the customer experience.

Walmart increases its dividend by one cent to 55 cents per share and approves a $ 20 billion share buyback program.

Read the full press release here.

– CNBC’s Courtney Reagan contributed to this report.