Walmart's Online Sales Growth Slows--2nd Update
21 February 2018 - 2:29AM
Dow Jones News
By Sarah Nassauer and Austen Hufford
Walmart Inc. is feeling the squeeze from Amazon.com Inc.
The world's biggest retailer reported strong holiday sales
Tuesday but said online sales growth slowed during the quarter,
marking a turn from three quarters of booming online growth, and
that its profit margin came under fresh pressure.
The retailer said lower prices during the quarter and continued
online sales growth -- generally less profitable sales -- hit
margins. Some operational snags ate into ecommerce growth.
Overall, Walmart reported sales in existing stores rose 2.6% in
the latest quarter, the 14th consecutive quarter of growth. In part
Walmart benefited from a strong economy that also boosted holiday
sales at other retailers this year, while improvements to fresh
produce and stronger sales across a broad category of merchandise,
also helped, the company said.
Ecommerce growth grew 24% this quarter, down from over 50% the
previous three quarters. The majority of the slowdown was expected
as its sales from Jet, the online store it bought in September
2016, contributed less to growth, said company executives on a
conference call.
But as holiday goods like TVs and toys flooded ecommerce
warehouses, those products squeezed room for everyday items,
leading to some out-of-stocks online, hurting online sales, Chief
Executive Doug Mr. McMillon said on the call. "Our in-stock for
basic items suffered as a result."
Shares fell 8.6% to $95.77 in morning trading, setting the
company to lose about $27 billion in market capitalization if the
losses hold Tuesday.
"Walmart continued to generate increased traction on multiple
fronts in the U.S.," said Moody's retail analyst Charlie O'Shea.
But margins are under pressure because of "the ongoing price-driven
market share battle with Amazon."
Many retailers are rapidly consolidating or buying smaller
online players to compete as more shoppers head online.
On Tuesday Albertsons Cos. said it plans to buy the rest of Rite
Aid Corp. that isn't already being sold to Walgreens Boots Alliance
Inc. The chief executives of the companies said in interviews
Monday that the merger is the best way for them to compete in
businesses increasingly threatened by Amazon, along with an
emboldened Walmart.
Walmart has drastically shifted how it spends, moving away from
building more cavernous supercenters, instead improving existing
stores and investing in ecommerce. That shift has included store
closures, job cuts and a tighter control on everyday expenses as
Walmart invests in faster home delivery, ecommerce acquisitions and
partnerships with international online retailers.
Ecommerce sales at Walmart U.S. grew quickly in the wake of the
acquisition of Jet.com Inc. Jet founder Marc Lore took over
Walmart's ecommerce operations, adding features like free 2-day
shipping on more items, expanding online selection and buying a
string of smaller online retailers. Walmart, the country's largest
grocer, also has added hundreds of online grocery pickup locations
at stores, which are counted in the e-commerce figures.
Walmart is cutting marketing spending at Jet, which it bought
for $3.3 billion, to focus on acquiring new customers for its main
website. Sales will temporarily slow, said Mr. McMillon as the site
continues to focus on higher-income, urban shoppers. Jet President
Liza Landsman is leaving the company this spring to work for
venture-capital firm New Enterprise Associates, said the firm
earlier this month.
Walmart is also spending to retain workers in a tight labor
market. Last month, Walmart said it would raise starting wages for
store workers to $11 an hour, add parental leave benefits and hand
out a one-time bonus to many hourly workers. The wage and bonus
payments would cost around $700 million up front, the company said.
Analysts estimate the additional parental leave benefits would cost
around $100 million.
Walmart has promised to rein in costs and has made a string of
job cuts in stores and corporate offices in recent years. It closed
10% of U.S. Sam's Club locations earlier this year and has slowed
Walmart store openings to focus spending on e-commerce growth.
On an adjusted basis, the company brought in $1.33 a share
during the fourth quarter, below the $1.37 expected by analysts
polled by Thomson Reuters.
Walmart said the closure of 63 Sam's Clubs during the quarter,
discontinuing other real-estate projects and other activities
related to the new tax code reduced the earnings per share figure
by $0.60. The company also said the new U.S. tax law added to
earnings by $207 million in its latest quarter, though that amount
could shift as the company completes its analysis.
Write to Sarah Nassauer at sarah.nassauer@wsj.com and Austen
Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
February 20, 2018 10:14 ET (15:14 GMT)
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