Walmart’s online growth slows, rattling investors
Despite pressure to make inroads against Amazon, Walmart showed Tuesday that it still has a ways to go in pleasing both its shoppers — online and in stores — and investors.
Walmart’s e-commerce sales were up 23% in the final quarter of 2017. But the gains were interpreted as insufficient compared to the previous quarter, when they rose 50%.
The lower-than-expected uptick in online sales alarmed investors, who sent shares plummeting 10.2% and cast a shadow over Walmart’s more upbeat projection that it will roar back this year with 40% growth.
During the quarter, Walmart said sales didn’t grow as fast as expected at Jet.com, an online consumer-products subsidiary acquired in 2016. And it said not having enough inventory to meet some demand during the holiday season also contributed to the dip.
“There are many demographics, especially younger and professional segments, for whom Walmart is not the destination of choice online,” Neil Saunders, managing director of retail consultancy GlobalData, wrote in a note to investors.
In its battle with Seattle-based Amazon, Walmart has attempted to make more inroads on its turf. In addition to planning to double the number of stores offering online grocery delivery, it has encouraged shoppers to order online, then pick up items at stores, which it sees as a key advantage.
Besides Jet.com, Walmart has scooped up e-commerce sites such as upscale menswear site Bonobos to strengthen its online presence and woo a more affluent customer. And this month, Walmart dropped “stores” from its corporate name, signaling its effort to be seen as more than a traditional, store-based company.
While mass-merchandising competitor Target said in December that it had bought delivery service Shipt and Amazon was reportedly considering whether to launch a delivery service that might compete with UPS and FedEx, Walmart has been testing more creative solutions. Last year, for instance, Walmart said it would try out a program in which employees would drop off customer orders on their way home.
But the changes came against a backdrop of declining profits overall.
Walmart earned $2.17 billion, or 73 cents in diluted earnings a share, during the fourth quarter, down from $3.75 billion, or $1.22 a share during the same quarter the previous year. For the full year, profits plunged 27.7% to $9.86 billion, or $3.28 a share. That was down from $13.6 billion, or $4.38 in diluted earnings a share, or $4.42 when adjusted. Those full-year numbers also missed the expected $4.98 a share forecast by S&P Global Intelligence.