Can Walmart grow its online business profitably?
Walmart had several positive developments to report in its fourth quarter earnings release. The company’s same-store sales in the U.S. grew 1.8 percent and its online revenues jumped 29 percent. Walmart’s gains came at a cost, however, as profits fell 18 percent ($1.22 a share) due to the retailer’s engagement in pricing competition with rivals Amazon.com, Target, et al.
On yesterday’s earnings call with analysts, Walmart CEO Doug McMillon pointed to progress the company is making online.
“We’re gaining traction and moving faster,” said Mr. McMillon (via Seeking Alpha). “We’re the second-largest U.S. online retailer by revenue, one of the top three online retailers by traffic and our Walmart app is among the top three apps in retail.”
Speaking about Walmart’s online marketplace, Mr. McMillon said it now contains more than 35 million SKUs, more than four times the number carried at the beginning of last year.
“We recently announced free two-day shipping on millions of items with a minimum order of $35. And as you might expect, we’ve seen a nice uptick in our e-commerce business since this launch,” he said. “The acquisitions of ShoeBuy and Moosejaw, in addition to Hayneedle, gave us immediate expertise and capabilities in new, more upscale categories of merchandise.”
Purchases made using Walmart’s Pickup Today app grew 27 percent over the holidays, according to the company. Mr. McMillon said wait times for items ordered through the app were down over the holidays even as demand increased. “Customers love being able to order an item with an app and get it that day,” he said.
Mr. McMillon expressed satisfaction with the way Greg Foran, head of Walmart’s U.S. stores, and Marc Lore, its e-commerce chief in the U.S., have been working together to “deliver the convenient shopping our customers desire, no matter how they choose to shop.”
- Walmart Fourth Quarter Earnings Press Release – Walmart
- Wal-Mart Stores’ (WMT) CEO Doug McMillon on Q4 2016 Results (Earnings Call Transcript) – Seeking Alpha
- Walmart profits drop 18% in 4th quarter despite strong holiday sales – The Washington Post
- Wal-Mart Posts Strong Holiday Sales, But E-Commerce Battle With Amazon Pinches Profit – The Wall Street Journal
- Higher customer traffic boosts Wal-Mart’s sales in holiday quarter – Reuters
- Will free two-day shipping give Walmart an edge over Amazon? – RetailWire
- Will doubling down on e-commerce pay dividends for Walmart? – RetailWire
DISCUSSION QUESTIONS: Do you think Walmart can protect profits while continuing to gain online market share? What do you see as the keys for the company to operate its e-commerce business profitably?