Walmart Sales Strong During Holidays, But Growth Shrinks

Walmart Inc., which during the last year has made big strides in its online operations in a battle with e-commerce giant, stumbled during the fourth quarter following a misjudgment with its inventory online for the holiday shopping season, which sent its stock plunging and reduced its market capitalization by over $31 billion.

Shares of Walmart were down over 10% on Tuesday and helped to pull down many of the other retail stocks with it. It was the biggest drop for one day for Walmart’s share price in over two years.

Walmart CEO Doug McMillon said that as the holiday goods such as toys and TVs flooded the e-commerce warehouses of Walmart, they squeezed room for the company’s everyday items like toilet paper, which meant that the retailer ended up running out of certain items, which hurt is online sales.

Walmart said as well that its profit margins in the U.S. were hit due to lower prices as well as by more sales shifting online. Sales online are usually less profitable than in brick and mortar stores.

Shares at Walmart have soared this year, helped by the high expectations for growth online. On Tuesday, Walmart posted a gain of 2.6% in its overall sales for its January 31 ending quarter. That was the 14th straight quarter of growth. However, the growth of its online sales in the U.S. was just 23% during the quarter, in contrast with the three previous quarters of growth of over 50%.

One Wall Street analyst said that figures were not enough for investors, as the quarter did not meet expectations.

Nevertheless, CEO McMillon expressed confidence on Tuesday saying the company looking ahead is expecting growth in e-commerce to increase from the level of the fourth quarter.

E-commerce represents less than 4% of the more than $500 billion annual revenue of Walmart. The retailer expects growth of online sales to be 40% for its ongoing fiscal year, which will end next January 31.

Walmart has worked quickly to construct its online business over recent years to head off the dominance online of Amazon. It shifted its spending to invest in web operations, including quicker home delivery as well as making several acquisitions of e-commerce businesses.

It has also spent to make improvements to existing stores, cuts jobs and tightened controls on expenses.

Walmart also announced the closing of 10% of Sam’s Clubs in the U.S. earlier in 2018 and has slowed down its openings of new Walmart locations to focus on the growth of e-commerce.

Leave a Reply