The Atlanta Journal-Constitution
Walmart online sales slow, pushing shares down 10%
NEW YORK — For months now, Wall Street has rewarded Walmart for engineering the kind of e-commerce turnaround that has eluded so many traditional retailers. But when the merchandising giant reported Tuesday that online growth had slowed during the critical holiday season, investors showed little patience, knocking down Walmart’s stock nearly 10 percent.
Walmart on Tuesday posted mixed results for the final three months of 2017. Sales rose 4.1 percent to $136.3 billion, the company said, but profits fell to $2.4 billion from $3.9 billion a year earlier. More troubling to some, online sales grew 23 percent in the fourth quarter, down from 50 percent in the previous quarter.
Wall Street had expected more from the Bentonville, Ark.-based giant, which has been investing heavily in recent years to compete with Amazon’s online prowess. Shares of Walmart stock tumbled to $94.84, their lowest level since October 2015.
But some analysts remained optimistic that Walmart was moving in the right direction. The company continued to attract more shoppers, they said, and got existing ones to spend more. And it continued to build its e-commerce business.
“Even in an era of stiff competition, Walmart is becoming more and not less relevant to the American consumer,” Neil Saunders, managing director of GlobalData Retail, wrote in a note to investors. “It is following the same strategy as Amazon: taking less profit today, for the prospect of
a stronger business tomorrow.”
Walmart — which last year had $500 billion in annual revenue, nearly three times Amazon.com’s $178 billion — has spent billions building up its e-commerce operation in recent years. It purchased online retailer Jet.com for $3.3 billion in 2016, and has since gobbled up a number of other niche sites like Moosejaw, Bonobos and ModCloth, aimed at attracting younger, more affluent shoppers.
The strategy has worked, analysts said: More people are buying online on Walmart’s sites, and those who do tend to spend nearly double what in-store shoppers do. Walmart’s annual online sales rose 44 percent to $11.5 billion last year, and the company says it expects that figure to grow another 40 percent this year.
“The fact that Walmart is talking about 44 percent online growth
for the year — that should be the focus,” said Charlie O’Shea, an analyst for Moody’s.
Walmart executives say they are doubling down on a two-part strategy to boost online sales, building up Jet.com in major cities, and promoting Walmart.com in other parts of the country.
“Walmart is just a really wellknown brand for value throughout the country — when you get into Oklahoma, Texas and the middle of the country, it just makes a lot of sense to invest in that brand rather than investing to introduce a brand that’s less familiar,” CEO Doug McMillon said in a Tuesday call with analysts. “On the other hand, if you take the New York metropolitan area as one example, the Jet brand is really well known, has a lot of traction, has appeal to urban, millennial, higher-income customers.”