Wal-Mart’s online momentum shows signs of slowing
After spending billions on its Web operations to take on rival Amazon.com, the last thing Wal-Mart Stores wanted to tell investors was that online sales momentum was slowing.
Yet the world’s biggest retailer said Thursday that e-commerce sales rose only 8 percent in the fourth quarter. That growth is down from 10 percent in the third quarter and 16 percent in the second.
The retailer attributed the deceleration to increased competition in Great Britain as well as economic downturns in Brazil and China. As for its domestic e-commerce sales, Wal-Mart would only say that its U.S. online operations have grown faster than the companywide total. But with the retailer set to spend more than $ 1.1 billion this year on e-commerce, investors are getting impatient.
“Their eyes were very big, and you can’t necessarily blame them for Bra-
zil or the U.K. or China, but they weren’t careful and conservative in their view of what e-commerce was going to do,” said Meredith Adler, an analyst with Barclays. She said Wal-Mart isn’t currently making a profit online and hasn’t indicated when it will.
Wal-Mart, based in Bentonville, Ark., earned $4.57 billion, or $ 1.43 per share in the three-month period ended Jan. 31, an 8 percent drop from a year ago.
Wal-Mart shares fell 3 percent Thursday to $64.12. It’s down 26 percent over the last year. The retailer’s slump helped end Wall Street’s three-day rally.
Meanwhile, Amazon said last month that its retail sales in the fourth quarter increased 20 percent to $33 billion. For all retailers, online sales grew 9 percent to $105 billion in the holiday period, according to the National Retail Federation. Wal-Mart doesn’t disclose the dollar amount of its online sales.
Despite Wal-Mart’s spending, the company still is falling short of Amazon on price and selection, said Guru Hariharan, chief executive officer of research firm Boomerang Commerce. During the holidays, Amazon was able to beat Walmart.com in key areas like electronics, toys and housewares, and Target Corp. also sold items for cheaper in some categories, he said. And Amazon had a significantly bigger selection than Walmart. com in every category Boomerang tracked.
One area Wal-Mart does have an advantage in is groceries, analysts said. The company has expanded its online grocery shopping to more than 150 locations in at least 20 markets in the U.S., letting customers order online and pick up at the store without leaving their cars.
But other competitors aren’t far behind. Amazon is testing its own grocery delivery service, which may use drones, and Google may even enter the market with its self-driving cars, Hariharan said.
“Wal-Mart has a five- to 10-year advantage in grocery,” he said. “They really need to double down on that because competing with Amazon on price is proving to be a bad idea.”