DISCUSSION

Slowing online sales and reduced profits worry Walmart investors

February 21, 2018Written by George Anderson

Photo: Walmart

Walmart’s stock price took a 10 percent hit yesterday after the company announced that its online sales grew 23 percent in the fourth quarter, down from 50 percent in the third, and that its operating margins shrunk as it focused more on its e-commerce operations. Lower online percentage sales growth may have surprised investors, but not Walmart management as the quarter marked the one-year anniversary of its acquisition of Jet.com. CEO Doug McMillon, however, did acknowledge that slowing sales were also partly due to “operational challenges” faced by the retailer. Mr. McMillon said that “seasonal spikes” in inventory of products including electronics, gifts and toys led to a situation in which Walmart fell short of its “basic in-stock for e-commerce” items. He said the experience will help the company learn “how to deal with higher volumes” going forward. Walmart’s margin challenge should not have been a surprise to investors. Reuters recently reported that Marc Lore, CEO of the retailer’s U.S. e-commerce operations, had held talks with large CPG suppliers to let them know that Walmart.com is focusing more of its efforts on higher priced items, preferably $10 and higher, in an effort to offset its delivery costs. Mr. McMillon expressed confidence in the company’s strategy. “We're accelerating innovation in the business to make shopping faster and easier for our customers. Creativity, decisiveness and speed are priorities,” he said. “We made good progress this past year to save busy families time and money, and we'll do more.” One bright spot for Walmart was its same-store sales, which increased 2.6 percent during the fourth quarter as traffic improved 1.6 percent. Walmart's customers who shop both in stores and on its websites are key for the company, said Mr. McMillon, spending nearly twice as much with Walmart as those who shop in stores alone. He pointed to online grocery as one area where customers spend more with Walmart after using the service. “We'll lean in this year by nearly doubling the number of online grocery locations in the U.S.,” he said.

Discussion Thread0