Coverage: Walmart’s online sales are disappointing

Walmart’s e-commerce sales were up 23 percent in the final quarter of 2017, but the gains were interpreted as insufficient compared to the previous quarter, when they rose 50 percent.

Charisse Jones of USA Today had the news:

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 shopper demand during the holiday season also contributed to the dip.

After seeing the results, however, some wonder if Walmart’s online troubles go deeper — especially when it comes to challenging Amazon.

“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. “This isn’t because it doesn’t sell what they want … It is because they do not associate Walmart with online or they default to Amazon.”

Phil Wahba of Fortune reported that Walmart lags far behind Amazon in online sales:

Those efforts have cost the retailer billions in recent years, but Walmart has assured investors of the payoff. The store chain keenly aware that it cannot afford any slowdown at a time when key rival Amazon remains well ahead in market share and arguably in innovation, with such projects as cashier-free stores. Plus, there’s the looming question of what Amazon will end up doing with newly-acquired Whole Foods Market in the grocery space.

But the holiday quarter showed how pricey Walmart’s reinvention is. In the fourth quarter, adjusted earnings per share increased to $1.33 for the company as a whole, missing expectations of $1.37 per share, according to Thomson Reuters I/B/E/S. And those pressure will persist in 2019: Walmart expects earnings of $4.75 to $5 a share this fiscal year, excluding some items, compared with an average Wall Street estimate of $5.13.

Yet there is no doubt Walmart’s tech initiatives are bringing in shoppers. Same-store sales rose 2.6% during the holiday quarter in the U.S.— their 14th straight increase. And more crucially, shopper visits rose 1.6%, illustrating how Walmart’s efforts to integrate physical stores and e-commerce are paying off. Analysts had forecast U.S. comparable sales to rise 2%, according to research firm Consensus Metrix.

Sarah Halzack of Bloomberg Gadfly writes that Walmart needs to focus on online grocery sales:

Investors shouldn’t panic about this yet. Walmart on Tuesday said online sales growth could be around 40 percent in the new fiscal year, suggesting executives think they can work through the fourth quarter’s problems relatively quickly.

But investors are right to be concerned. After all, Walmart is opening relatively few stores in the U.S. this year, so it will depend mightily on e-commerce for overall sales growth. And strong online sales are essential in taking the fight to Amazon.com Inc.

As it tries to kick its e-commerce engine into higher gear, Walmart would do well to concentrate on its grocery business. That’s a category where it has already gotten good traction with its in-store pickup program and thus has a good foundation of customer loyalty on which to build.

And as grocery accounted for more than half of Walmart’s sales in fiscal 2017, it’s the category where it can least afford to get trampled by Amazon.