Walmart's stumbles with online growth

Walmart is finding it somewhat more difficult than expected to compete head-to-head with Amazon.The nation's l...

Posted: Feb 20, 2018 3:28 PM
Updated: Feb 20, 2018 3:28 PM

Walmart is finding it somewhat more difficult than expected to compete head-to-head with Amazon.

The nation's largest retailer has been making tremendous gains in online sales, but those still represent only a fraction of its $500 billion in annual sales.

But the pace of online growth slowed more than expected in the quarter. Online sales were up 23% compared to a year ago, but slower than the 50% growth Walmart enjoyed during the first nine months of its fiscal year. It's also slower than the 40% growth it is projecting for this coming fiscal year.

Some of that slowdown in growth was because the company ran out of some items at its online fulfillment centers, said CEO Doug McMillon.

"We're learning how to deal with higher volumes and learning how to deal with a higher peak than what we had previously," said McMillon on a call with analysts.

But fulfillment issues don't account for all of the problems. The company also announced thinner profit margins as it needed to cut prices more than expected to compete with Amazon. It also had increased transportation costs, partly due to pricier fuel and partly due to the cost of free two-day shipping program.

A year ago it launched free two-day shipping on online purchases of $35 or more, and unlike Amazon, it doesn't require customers to pay an annual membership fee to get that free shipping.

Related: Walmart just changed its name (but you won't notice it)

The thinner margin resulted in a 42% drop in income for the fourth quarter, which included the holiday shopping period. The decline comes despite a 4% rise in overall sales.

Sales in U.S. stores were up 2.6% in the quarter, which was better than the company had forecast. Still the news about the lower than expected earnings and thinner margins sent shares of Walmart 7% lower in early trading.

But the company is still making more inroads into online shopping than many traditional brick-and-mortar retailers. And executives say they're pleased with the online performance, despite some of the setbacks.

"This has not been our historic competency," said McMillon. "We're building something new. We've got some exciting things coming."

Related: Walmart is killing Target and making Amazon sweat

Even analysts who were generally pleased with the latest results said they still see signs of the difficulties Walmart is having as it tries to become more of an online power.

"We still believe Walmart has more work to do to widen its e-commerce customer base," said Neil Saunders, managing director of GlobalData Retail. "There are many demographics, especially younger and professional segments, for whom Walmart is not the destination of choice online. This isn't because it doesn't sell what they want or because the price or delivery options are suboptimal; instead, it is because they do not associate Walmart with online or they default to Amazon. This is a tough nut for Walmart to crack."

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 319428

Reported Deaths: 7361
CountyCasesDeaths
DeSoto22264265
Hinds20645421
Harrison18386317
Rankin13864282
Jackson13678248
Madison10237224
Lee10052176
Jones8458167
Forrest7822153
Lauderdale7257242
Lowndes6498149
Lamar633688
Lafayette6301120
Washington5419136
Bolivar4835133
Panola4664110
Oktibbeha466098
Pearl River4599147
Marshall4572105
Warren4440121
Pontotoc425073
Monroe4155135
Union415576
Neshoba4059179
Lincoln4008112
Hancock386087
Leflore3515125
Tate342386
Sunflower339391
Pike3368111
Alcorn324172
Scott319574
Yazoo314171
Itawamba305078
Adams304985
Copiah299666
Coahoma298383
Simpson298189
Tippah291768
Prentiss283661
Leake271774
Marion271280
Covington267183
Wayne264442
Grenada264087
George251951
Newton248663
Tishomingo231268
Winston229981
Jasper222148
Attala215073
Chickasaw210559
Holmes190374
Clay187754
Stone187433
Tallahatchie179941
Clarke178980
Calhoun174032
Yalobusha167840
Smith164034
Walthall135347
Greene131833
Lawrence131024
Montgomery128643
Noxubee127934
Perry126638
Amite126142
Carroll122330
Webster115032
Tunica108027
Jefferson Davis107833
Claiborne103030
Benton102325
Humphreys97533
Kemper96629
Franklin85023
Quitman81916
Choctaw79018
Wilkinson69332
Jefferson66228
Sharkey50917
Issaquena1696
Unassigned00

Alabama Coronavirus Cases

Cases: 548163

Reported Deaths: 11281
CountyCasesDeaths
Jefferson809371565
Mobile42040826
Madison35654524
Tuscaloosa26161458
Shelby25588254
Montgomery25080611
Baldwin21833313
Lee16259175
Calhoun14714325
Morgan14621285
Etowah14166362
Marshall12447230
Houston10764288
Elmore10293212
Limestone10179157
St. Clair10158250
Cullman9935201
Lauderdale9592249
DeKalb8965189
Talladega8455184
Walker7334280
Autauga7230113
Blount6938139
Jackson6919113
Colbert6411140
Coffee5626127
Dale4929114
Russell454541
Chilton4472116
Franklin431083
Covington4272122
Tallapoosa4133155
Escambia401780
Chambers3724123
Dallas3606156
Clarke352861
Marion3241106
Pike314078
Lawrence3125100
Winston283572
Bibb268264
Geneva257281
Marengo250665
Pickens236662
Barbour234659
Hale226778
Butler224071
Fayette218162
Henry193843
Cherokee187245
Randolph186944
Monroe179341
Washington170439
Macon162951
Clay160159
Crenshaw155357
Cleburne153144
Lamar146237
Lowndes142054
Wilcox127030
Bullock124242
Conecuh113330
Coosa111529
Perry108726
Sumter105732
Greene93434
Choctaw61725
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