Is Walmart on an unstoppable run?

Discussion
Photo: Walmart
Aug 17, 2017
George Anderson

It appears that Walmart’s investments in its stores and online operations are paying off in market share gains.

The world’s largest retailer beat Wall Street’s expectations, with revenues climbing to $123.36 billion for the quarter ending July 31. Analysts surveyed by Zacks Investment Research, via The Associated Press, were expecting revenues of $122.71 billion.

The retailer’s earnings per share fell to 96 cents per share, down from $1.21 per share in the same quarter last year. Moody’s lead retail analyst, Charlie O’Shea, attributed the decline to Walmart’s “strategy of tactically investing in price to extract that share, as well as the impact of the company’s other investments.”

The chain’s same-store sales in the U.S. rose 1.8 percent, the twelfth straight quarterly gain, as traffic increased 1.3 percent.

E-commerce sales for Walmart grew 60 percent with the chain pointing to positive consumer response to its expanded assortment online.

“Explosive online growth is continuing its post-Jet.com trend,” said Mr. O’Shea in an email to reporters. “We expect this level of performance to continue, along with Walmart’s ongoing efforts to leverage Jet by making tactical pure-play online acquisitions similar to the recent Bonobos deal, and therefore put itself in the solid number two position behind Amazon in most online categories.

“As Walmart is a key player across most back-to-school/back-to-college product categories, and we are in the heart of those seasons, we would expect further promotional activity in Q3, with smaller retailers to feel increased levels of stress as Walmart and Amazon continue their battle over market share,” he said.

DISCUSSION QUESTIONS: Are you surprised that Walmart continues to grow both its online and offline businesses? Do you expect this trend to continue? What is Walmart doing right?

Braintrust
"Walmart gets good marks from me, not because they are “unstoppable” but because they are never afraid to keep changing. "
"Walmart is positioning itself very well for an almost inevitable economic downturn."
"Walmart is not exactly unstoppable — the scale of its experimentation is likely to result in some significant blunders..."

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31 Comments on "Is Walmart on an unstoppable run?"

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Chris Petersen, PhD.
BrainTrust

The question is not whether Walmart is “unstoppable” … the question is whether they are moving fast enough to blunt the gains of the Amazon juggernaut.

The other question is whether Walmart can pull of a “Bezos” and convince shareholders that profits may suffer while they invest in initiatives to dominate in the future.

Art Suriano
BrainTrust

Walmart has been doing many things right by expanding e-commerce opportunities through the acquisitions of successful online companies and by continuing to introduce smart in-store programs like BOPIS discounts. They have no problem trying new ideas and taking risks. Not everything will be successful but what I commend Walmart for is being innovative and not just chasing competition. They are leading it and it’s paying off.

Jon Polin
BrainTrust

With hype around alternative retail formats and niche verticals, Walmart still is unmatched in some core retail tenets — location, assortment and price. This is even more true when holistically considering Walmart stores and the various Walmart online properties. Plus, to their great credit, Walmart is investing in innovation across both offline and online. With all these ingredients, it’s not surprising that Walmart continues to grow. This trend is likely to continue.

Dick Seesel
BrainTrust

I would never say “unstoppable,” but Walmart’s investments in stores and omnichannel certainly seem to be paying off. They do need to anticipate the impact of the Amazon-Whole Foods tie-up in terms of its impact on online grocery retailing. But Walmart is seeing payback from its multi-year investments in upgrading brick-and-mortar, focusing on better execution in food and getting its full-size prototype right.

Walmart is the most obvious case of a retailer figuring out how to leverage its e-commerce business into store traffic, but Target’s results seemed to point to the same thing. Even stores like Kohl’s with comp-store decreases suggested 2nd quarter improvements in store traffic — so maybe the stores with the most aggressive omnichannel effort are starting to see results.

Joanna Rutter
BrainTrust
1 month 2 days ago

Aggressive omnichannel is so important. Larger chains vary wildly in how well they’ve able to online demand — “the bigger they are, the harder they fall” comes to mind with brands like JC Penney — Walmart is an obvious leader here.

Adrian Weidmann
BrainTrust

Walmart’s success in both brick-and-mortar and online stores continues to validate the value of the physical store. As more Walmart shoppers become comfortable with the online world I suspect there will be a tipping point, at which point the physical store will have continued to evolve and morph into a hybrid environment to address both the physical and online shopping experiences.

Charles Dimov
BrainTrust

Fast innovation is driving Walmart’s success. They have stepped up to the Amazon challenge and are showing retailers that it can be done. I think their focus on omnichannel retail has been key. It means driving online as well as physical store sales. Innovations here have made the difference as Walmart offers customers a variety of options (pickup lockers, curb-side pickup, post outlets, etc.). The key lesson are that omnichannel works and all retailers have a fighting chance to grow revenue by driving innovation.

Brandon Rael
BrainTrust

There certainly is some significant momentum building up at Walmart, as they grow their digital portfolio. However, if they are to take an “Amazonian” approach to growth then the shareholder expectations will have to be in check, as they may experience some profitability losses as their digital businesses help to drive sustainable revenue growth.

A digital-first strategy, especially when executed successfully, will help drive revenue across all shopping channels and help grow the brands. What remains to be seen how the autonomous businesses, such as jet.com, Bonobos and others continue to innovate and sustain their loyal customer following under the Walmart umbrella. The advantage for these subsidiaries is the investment capital to help power their growth. The Walmart team can certainly learn e-commerce/digital best practices from Bonobos and their leadership team, as they were one of the first digital native brands to evolve into a hybrid retail model with their showrooms.

Ron Margulis
BrainTrust

Walmart is positioning itself very well for an almost inevitable economic downturn. The retailer isn’t mimicking Amazon Prime, which may be one of those “luxury expenses” consumers facing challenging financial circumstances give up. Walmart is pushing its low-price reputation to the extreme. And it is building out the fresh offering pretty aggressively in-store, although there is a lot of work to do for the segment on Walmart.com.

Gene Detroyer
BrainTrust

No surprise here. I have given big bravos to Walmart for all the things they are trying. Who knows which of their acquisitions will prove out to be beneficial but if you don’t try them, you never know. Walmart has understood for a long time that the basic retail business has matured and their Supercenter business model has matured along with it. Now they are trying, trying, trying in the Bezos mode. There will be payouts down the road.

Harley Feldman
BrainTrust

Having worked with Walmart for many years, I am not surprised that they continue to grow their online and offline businesses. The company and its employees understand retailing and how to attract customers to purchase products from their stores incredibly well — it is in the Walmart culture. Walmart has upgraded stores, changed its merchandise and invested early and heavily in its online presence through Walmart Labs. Its acquisitions of jet.com, Moosejaw, Bonobos and others show it has brought in new thinking and customer bases to expand its business.

I expect these Walmart trends to continue. Retail is what Walmart does and they will continue to evolve and expand as the retail industry evolves.

Anne Howe
BrainTrust

Walmart gets good marks from me, not because they are “unstoppable” but because they are never afraid to keep changing. Their eyes are on the shopper and their investments are made to serve the shopper base they have and to continue to attract the base they covet. I don’t think they want to be Amazon, and rightly so!

Roy White
BrainTrust

“Unstoppable” might be an excessive word, although Walmart has definitely done well in the second quarter. However, corporately, operating earnings were down, gross margins narrowed, expenses ballooned as a percentage of sales and the net-to-sales ratio decreased. Walmart U.S. did well with improvements in comp store sales, traffic and tickets, and this division’s operating earnings rose a good 2.2 percent. Even so, that gain did not match the 3.3 percent increment in sales, a development which indicates rising costs. Moreover, the performance of Walmart International and Sam’s Club were not nearly as strong as Walmart U.S., with declines in several different key operating stats.

Max Goldberg
BrainTrust

Walmart’s success should not be a surprise. Company management has not been afraid to invest in new businesses and technology while doing whatever is necessary to hold down prices. I expect Walmart to continue to invest and grow while challengers like Target play catch-up.

Jasmine Glasheen
Staff

I couldn’t be less surprised by Walmart’s success. Remember a few months ago when we were all speculating whether the company’s investments into Millennial niche brands like Moosejaw, Modcloth, Bonobos and heck … even Jet would pay off? Well here we are and the numbers speak for themselves.

Walmart is a prime example of a huge corporation maintaining relevance in an evolving marketplace by being willing to shake things up. Big box stores which are flailing would be wise to take a knee.

Lee Kent
BrainTrust

I have been very impressed with Walmart’s moves as of late. Especially their investments in innovation. Even without an AWS in their pocket to pay for it, they keep on trying new things and they seem to be winning. I call that smart retailing in today’s economy. For my 2 cents.

Sky Rota
Guest
1 month 2 days ago

No I’m not surprised at all. Just looking at Walmart’s clean, colorful site makes it an inviting place to shop. If I’m looking to buy Fruit Loops cereal only one choice comes up for $3.98 with two-day shipping on orders over $35. I’m fine with that. I don’t need to be a member and there aren’t 20 choices and five pages from random stores popping up with insane prices trying to rob me like on Amazon. Why does Amazon let their stores charge crazy prices for items? It’s insane. And honestly it’s way to many choices with Amazon Fresh, Prime, Prime Pantry — I can’t keep up.

I have three older siblings in college and this year my mom didn’t buy one thing to send them from Amazon. She did all her online shopping for them from Walmart, delivered to their dorms and from Instacart with fresh groceries delivered in one hour to my brother’s apartment in D.C.! The competition is getting fierce.

Lee Peterson
BrainTrust

Walmart did the right thing a long time ago: told The Street that things wouldn’t be so rosy while they re-invested in their longevity. They also literally came out and said, “we’re going to compete” (with Amazon, or course). They drew a line in the sand and said, “we’re not going away and you’re not going to crush us like you did to others.” That had to be SO motivating for all associates, executives and thought leaders under their flag. “We’re going to fight!” That was the message.

When the smoke clears, Walmart will be there. The ultra-competitive spirit Sam Walton instilled in his culture still prevails today, and Walmart should be lauded for it. While others are circling the wagons, Walmart greased up the PR and innovation machines and is headed towards the new retail reality. Bravo, Bentonville, bravo.

gordon arnold
Guest
We must add putting the right products and services at the right price in the store to the reasons for Walmart’s success. The three reasons mentioned make growth in market share, same-store sales and e-commerce easy. Consumers with a keen understanding of how to find the best deals for needs and wants will always testify that there is no sacred store or site for guaranteed success. The average customer sees purchases of necessities and replenishment as a task that can cost them in terms of time rather than money. When one visits a Walmart store or the e-commerce site, an easy experience is waiting at the door. Add to that aggressive pricing and the wins we see here are not too surprising. The presence of thinner margins and profits need to be discovered and addressed to curtail losses. If we look closely at the clearance racks we see a size, scope and turn rate that points to purchase habits that need to be addressed. Personnel turnover is driving the costs of placement through the roof and the capability to address this opportunity may be hampered by the ability of those people in care of this important task. What stands out… Read more »
Neil Saunders
BrainTrust

As the country’s largest retailer, Walmart fights battles on all fronts. Its entrepreneurial spirit, willingness to invest and common-sense approach are all helping it to advance.

The investments in online — including the acquisition of Bonobos, Jet, Moosejaw, et al. — have allowed Walmart to capture more customers and are giving it more of a footprint in the digital space.

Despite its forays into new areas, Walmart hasn’t forgotten retail basics. Targeted price reductions, improved service in-store and tweaks to ranges have allowed it to hold its own against players like Aldi, dollar stores and the like.

The bottom line is that Walmart’s scale, its logistical expertise and its determination mean it can — and is — holding its own against the many threats lined up against it.

Jett McCandless
BrainTrust

Nobody should be surprised when a company with that much capital, reach and that many consumers is able to grow its business, especially after acquiring an excellent e-commerce platform that was already experiencing rapid growth. It is still impressive, however. Walmart has been extremely tactful in going to battle with Amazon and, at this point, they seem like the only clear cut competitor Amazon faces in online retail. Looking at simple market share, Walmart still has a ways to go before truly challenging Amazon in online sales, but they’re trending in the right direction.

Kai Clarke
BrainTrust

Walmart is focused on growing their business, as any retailer should be. Whether online or offline, they will continue to spend resources to increase revenues and market share, since that is their main goal, and they have to report positive gains as part of the expectations of being a publicly traded company. This doesn’t make Walmart unstoppable (Amazon clearly has them “stopped” in the online channel), but makes the true question even more painful. Why did it take Walmart this long to even start to do this?

James Tenser
BrainTrust

Walmart is gaining market share online in large measure because it’s been buying it through its acquisitions of Jet.com, Bonobos, Moosejaw and others. Rather than allowing its current arch-rival Amazon.com to continue skimming digital sales unchallenged, the Great Wal has made the pragmatic decision to keep up the pressure and make itself more relevant to digital-native shoppers.

Meanwhile, it continues to leverage its unmatched physical store presence and expand BOPIS services, almost daring Amazon to try to formulate a competitive response. The Whole Foods deal grabbed big headlines last month, but it’s a complex maneuver for Amazon that adds only a sliver of market share.

Walmart is not exactly unstoppable — the scale of its experimentation is likely to result in some significant blunders — but its strategies look very effective right now. With its huge assets, only Walmart has the clout to sacrifice near-term margins to keep Amazon in check.

Ricardo Belmar
BrainTrust

“Unstoppable” is probably an exaggeration in the era of disruption that we live in, however, Walmart is clearly showing us how their investments are paying off in becoming a digital-first retailer in their way of thinking. Walmart may be the only general retailer that has the capital and human resources to bring the fight to Amazon and while they may not win, they’ll firmly secure their #2 spot in ecommerce with the pace they are showing us. In recent discussions I’ve questioned Walmart’s string of online acquisitions in apparel and asked if this was to drive new customer acquisition — it now seems that is exactly what they’re doing. While the numbers are looking good, if Walmart continues this trend they’ll be the strongest competition for Amazon. I don’t see them backing down now either with the acquisition strategy or the line of digital innovation they’re applying to stores. I expect we’ll see many new things coming from Walmart as they have the infrastructure and capital to support it.

Shep Hyken
BrainTrust

This is exactly what is expected from Walmart. As a top retailer, they need to stay relevant and competitive. Wall Street appears to feel they do. If all Walmart did was keep operating as they did ten years ago they would become an entry in a history book on retailing. Instead, they choose to innovate and adapt to the changing retail landscape.

Brian Kelly
Guest
1 month 2 days ago

“Unstoppable” is not a word used in describing the arc of retail history.

Walmart is navigating the channel transition from bricks and adding clicks, similar to Sears evolving from catalog and adding stores (first urban and then suburban). At this time, WMT seems to have an agile organization culture to nimbly move with the consumer. WMT has adopted a consumer centric selling model. The vastly improved store experience added cost that has paid off. And the buying spree of the past 5 years of tech/digital companies have enabled some of the changes.

I think McMillon deserves the lion-share of credit. He has acquired competencies as well as personalities and blended them into Sam’s model. Bravo!

Will it continue? As Sam might say, “retail ain’t for sissies!”

Min-Jee Hwang
BrainTrust

It’s no surprise that Walmart continues to grow both its online and offline businesses. Walmart has been charging full force to expand its online sales through a handful of acquisitions and through new programs like BOPIS. To compete against Amazon, Walmart has also ramped up its efforts to create an omnichannel experience. Additionally, Walmart hasn’t been afraid of taking risks to invest in their growth and it is safe to say they’re not backing down anytime soon.

Cynthia Holcomb
BrainTrust

The New Walmart! Jet infused. Great Walmart is challenging Amazon. Although when it comes to soft goods, how many of us have purchased anything on Jet.com or Walmart.com? Ever? While stats say more retail searches originate from Amazon than Google, usually the search is for commodity type items or hyper specific products like tents and cameras. The stats also say online apparel sales has usurped cameras and computers as the number #1 online sales category. Unfortunately shopping for apparel, jewelry, shoes and other items purchased based on individual preference on Walmart/Jet and Amazon is challenging, time-consuming, involving lots of time and guess work to make a purchase. Too many choices. If Jet/Walmart can help their customers find what they want to buy from their non-commodity, higher margin, vast soft goods inventories, quickly, then we are talking game changer! Meanwhile, try shopping for clothes on Walmart and Jet.

Michael La Kier
BrainTrust

We’re seeing something that could be unique in the history of retail unfolding before our eyes. The 1,000-pound gorilla that acts like its hair is on fire, not resting on its past successes. Walmart is not giving lip service to change (like most large companies in retail and CPG) they are living it. It is fascinating to watch.

Chris Bryson
Guest

Walmart is recognizing that today’s consumer wants choice for how they shop on any given day and is focusing their innovation on providing that choice. This strategy is obviously succeeding. We’ve seen that the large majority of consumers who shop online with our US retail clients are continuing to go in-store weekly, meaning that the online shopper is really the omnichannel shopper. So, while it’s apparent that the physical store is here to stay, the retailers that invest in an omnichannel solution are the ones that will succeed the fastest.

Phil Chang
BrainTrust

“Unstoppable” is unfinished. They are on an “unstoppable buying spree” might be one way to finish the sentence. We’ve yet to see how Jet.com and Bonobos actually affect their business. Walmart has never been afraid to innovate, they’ve just gotten slower with the number of layers and complexity of their business.

If Walmart finds its five-and-dime roots with Jet.com and Bonobos integrated into their plan, “unstoppable” might be a complete phrase for them. For the time being though we’ll need to wait and see.

wpDiscuz
Braintrust
"Walmart gets good marks from me, not because they are “unstoppable” but because they are never afraid to keep changing. "
"Walmart is positioning itself very well for an almost inevitable economic downturn."
"Walmart is not exactly unstoppable — the scale of its experimentation is likely to result in some significant blunders..."

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