Retailer: Website sales rise in quarter

Wal-Mart exec: Effort paying off

Wal-Mart Stores Inc. Chief Executive Officer Doug McMillon wasn’t happy with the company’s e-commerce sales in the first quarter of fiscal 2017, saying year-over-year growth had become too slow for a retailer pumping billions into the expansion of its online capabilities.

The disappointment faded last week as e-commerce sales climbed 11.8 percent during the second quarter of the fiscal year. Not only did the acceleration show that the retailer’s efforts to reinvigorate its e-commerce sales were successful during the quarter, but it also ended two years of decelerating sales growth.

Wal-Mart’s online sales grew 27 percent during the first quarter of fiscal 2015, but steadily declined to 24, 21, 18, 17, 16, 10, 8 and 7 percent growth over the next eight quarters. Ending the downward trend, according to analysts, was important for the retailer as it pushes forward in the competitive retail landscape.

“Doug said it. They’ve been disappointed,” Edward Jones retail analyst Brian Yarbrough said. “Online hasn’t grown. They’re not keeping pace with the industry and aren’t comfortable with it. They know it’s of growing importance. … They’ve got it heading in the right direction again, so it’s positive.”

Wal-Mart executives pointed to several factors contributing to the accelerated sales growth in the second quarter, particularly in the U.S., where results were stronger than international markets.

The retailer has aggressively expanded its online assortment since the beginning of the year, and the added offerings have helped boost sales. Wal-Mart began the year with about

8 million products available for consumers at Walmart. com. The number has since grown to 15 million.

The retailer also continued to expand its grocery pickup service, which allows customers to order items online, drive to the store and have the order delivered to their cars. The service expanded to 30 more markets nationwide during the quarter and now is available in more than 60.

Wal-Mart has rolled out its mobile payment service, Wal-Mart Pay, nationwide. It is also offering consumers a free 30-day trial of its ShippingPass program, which offers free two-day shipping on all eligible items — the company’s answer to Amazon Prime.

“We’ve been investing a lot of energy, a lot of time in building the foundation of that e-commerce business,” Wal-Mart Chief Financial Officer Brett Biggs said during a conference call with reporters. “So we’ve talked about things like what we’ve done in online grocery and WalMart Pay and fulfillment centers and other things we’ve done around our systems to get the foundation built. Then, over time, we would see results from that.

“I think you’re seeing some of that in this quarter as we saw some acceleration.”

While the second-quarter acceleration of e-commerce sales ended the downward trend for Wal-Mart, it still lags behind the national pace.

E-commerce sales growth across retail was 15.8 percent in the second quarter, according to estimates from the U.S. Department of Commerce.

It’s an indication that WalMart still has work to do, but analysts cautioned that the Bentonville-based company’s work shouldn’t come at the expense of its physical locations. The retailer’s 4,600 stores nationwide remain the driver for much of the company’s revenue. Wal-Mart reported $76.2 billion in U.S. net sales during the quarter, along with same-store sales growth of 1.6 percent and traffic gains of 1.2 percent.

“It’s a tough balance,” Stephens Inc. retail analyst Ben Bienvenu said. “Increasingly consumers are moving their shopping preferences online, so Wal-Mart recognizes they need to be positioned for it. But from a cash flow and earnings perspective, it matters what they’re doing in the store.”

The retailer will continue its push for e-commerce growth, believing it can blend stores and online offerings through programs like grocery pickup to create a seamless shopping experience.

McMillon said Wal-Mart’s decision to sell its Chinese e-commerce business to JD.com during the second quarter in exchange for a 5 percent stake in the Beijing-based online retailer will help “extend the reach of our brands to millions of new customers.”

Domestically, executives believe this month’s $3.3 billion acquisition of Jet.com will provide a path to reach more customers and drive e-commerce sales growth.

“From an e-commerce perspective, we’re never satisfied with anything,” Biggs said. “So we’re always looking to grow the business. … Doug mentioned in his remarks last quarter that we weren’t happy with the results. We’re certainly more pleased within this quarter given the acceleration. But we’re going to continue to press and keep growing this business on an accelerated pace.”