Wal­mart’s on­line sales grow by 33%

San Francisco Chronicle Late Edition - - BUSINESS - Michael Cork­ery is a New York Times writer.

“We are re­ally en­cour­aged by our progress and ex­e­cu­tion this quar­ter.”

Marc Lore, head of Wal­mart’s U.S. e-com­merce busi­ness

Wal­mart, hop­ing to quell in­vestors’ fears that its strat­egy for com­pet­ing with Ama­zon had veered off course, said Thurs­day that its e-com­merce push was back on track in the year’s first quar­ter.

On­line sales rose 33 per­cent in the first three months of 2018, help­ing to drive the re­tailer’s over­all rev­enue above an­a­lysts’ ex­pec­ta­tions.

The in­crease in e-com­merce sales, while slower than in pre­vi­ous quar­ters, im­proved on the 23 per­cent growth rate that Wal­mart re­ported at the end of 2017. The com­pany re­cently re­designed its flag­ship web­site, though Wal­mart said it was too early to quan­tify how much the re­design was help­ing to gen­er­ate new sales.

“We are re­ally en­cour­aged by our progress and ex­e­cu­tion this quar­ter,” Marc Lore, head of Wal­mart’s e-com­merce busi­ness in the United States, said in a con­fer­ence call.

In­vestors were unim­pressed by the re­sults. De­spite the fact that the com­pany’s ad­justed earn­ings per share of $1.14 beat an­a­lysts ex­pec­ta­tions of $1.12, Wal­mart’s stock fell nearly 2 per­cent Thurs­day.

The com­pany is try­ing to of­fer all things to all shop­pers as it tries to counter Ama­zon’s on­line dom­i­nance — a nice phys­i­cal store to shop in, an easy-to-use web­site and fast home de­liv­ery.

“This whole con­verged ex­pe­ri­ence we think is re­ally im­por­tant,” said Greg Fo­ran, head of Wal­mart’s op­er­a­tions in the United States.

It is an ex­pen­sive propo­si­tion. For a com­pany with a long his­tory of squeez­ing ex­penses from its stores, Wal­mart’s oper­at­ing profit is now un­der pres­sure, as it makes in­vest­ments in both e-com­merce and in im­prov­ing its big boxes. This year the com­pany raised its start­ing wage to $11 an hour to bet­ter com­pete for work­ers in the tight­en­ing la­bor mar­ket.

One bright spot for e-com­merce sales was on­line gro­cery pickup, which al­lows cus­tomers to or­der on­line and pick up their food at the store. Wal­mart is also in­creas­ing home de­liv­er­ies of gro­ceries.

This week, Ama­zon made its own chess move, an­nounc­ing spe­cial dis­counts for its Prime mem­bers when they shop at Whole Foods Mar­kets.

A big ques­tion fac­ing Wal­mart — and other brick-and­mor­tar re­tail­ers scram­bling to build out their on­line ca­pa­bil­i­ties — is how much e-com­merce sales are can­ni­bal­iz­ing trans­ac­tions that would have oth­er­wise been made in its stores. The ex­tra cost of home de­liv­ery cuts into the mar­gins on each sale.

An­a­lysts say the com­pany needs to find new cus­tomers now that its more than 5,000 Wal­mart and Sam’s Club stores have largely sat­u­rated most of the United States. Last week, Wal­mart an­nounced it was spend­ing $16 bil­lion to ac­quire a con­trol­ling stake in Flip­kart, In­dia’s lead­ing e-com­merce site.

With more than 300 mil­lion tech-savvy Mil­len­ni­als, In­dia is an en­tic­ing mar­ket for Wal­mart. But the push into In­dia is also fraught with risks, given the coun­try’s prob­lem­atic in­fra­struc­ture and the re­al­ity that much of the pop­u­la­tion can barely af­ford ba­sic ne­ces­si­ties.

Closer to home, Wal­mart is also try­ing to reach younger, ur­ban and more af­flu­ent on­line shop­pers, who have long been more of Ama­zon’s core cus­tomer base than Wal­mart’s.

Lore said that Jet.com, an e-com­merce site that Wal­mart ac­quired for $3.3 bil­lion two years ago, is try­ing to make in­roads in mar­kets like New York City and San Francisco where Wal­mart has few, if any, stores. Jet, for ex­am­ple, re­cently started of­fer­ing a larger range of Ap­ple prod­ucts.

Wal­mart’s more main­stream web­site is try­ing to ex­pand its higher end brands also. In the com­ing weeks, the web­site will start sell­ing about 125 brands from Lord & Tay­lor — a part­ner­ship model that Lore said the com­pany was “ag­gres­sively pur­su­ing.”

Richard Drew / As­so­ci­ated Press

Wal­mart is re­port­ing bet­ter-than-ex­pected profit and rev­enue for the first quar­ter with re­bound­ing on­line sales.

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