Walmart’s online sales grow by 33%
“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.”
Walmart is reporting better-than-expected profit and revenue for the first quarter with rebounding online sales.