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: 307519

Reported Deaths: 7096
CountyCasesDeaths
DeSoto20772248
Hinds19888408
Harrison17489302
Rankin13311275
Jackson13097243
Madison9895210
Lee9856169
Jones8290160
Forrest7523146
Lauderdale7187237
Lowndes6262144
Lamar610584
Lafayette6027117
Washington5280132
Bolivar4769129
Oktibbeha455297
Panola4442103
Pearl River4419139
Warren4280118
Marshall4273100
Pontotoc416472
Monroe4057132
Union403675
Neshoba3987176
Lincoln3869108
Hancock372085
Leflore3468124
Sunflower329389
Tate322681
Pike3180104
Scott310572
Yazoo304368
Alcorn297764
Itawamba296776
Copiah292965
Coahoma289677
Simpson287484
Tippah284668
Prentiss275659
Marion265779
Wayne261341
Leake261073
Grenada254982
Covington254580
Adams245882
Newton244859
George237847
Winston225981
Tishomingo222067
Jasper219748
Attala213273
Chickasaw204857
Holmes186471
Clay182454
Stone179131
Clarke176876
Tallahatchie175240
Calhoun163230
Yalobusha158836
Smith158534
Walthall130543
Greene129433
Lawrence126223
Noxubee125933
Montgomery125542
Perry125138
Carroll120826
Amite120041
Webster113432
Jefferson Davis105432
Tunica102525
Claiborne101330
Benton97225
Kemper95226
Humphreys94332
Franklin81823
Quitman78916
Choctaw72817
Jefferson64828
Wilkinson64727
Sharkey49617
Issaquena1686
Unassigned00

Alabama Coronavirus Cases

Cases: 518899

Reported Deaths: 10712
CountyCasesDeaths
Jefferson753641487
Mobile37763798
Madison33859494
Tuscaloosa25266443
Montgomery23962565
Shelby23106238
Baldwin20631300
Lee15524165
Calhoun14284311
Morgan14139268
Etowah13662345
Marshall11957219
Houston10380278
Elmore9993200
Limestone9811147
Cullman9470188
St. Clair9426234
Lauderdale9215227
DeKalb8746181
Talladega8058171
Walker7087275
Jackson6754110
Autauga6723103
Blount6483135
Colbert6203130
Coffee5399112
Dale4767110
Russell428838
Franklin419982
Chilton4083109
Covington4053114
Tallapoosa3893146
Escambia387674
Dallas3527149
Chambers3499122
Clarke346360
Marion3065100
Pike305875
Lawrence295395
Winston272372
Bibb256258
Marengo248661
Geneva245875
Pickens232959
Barbour224755
Hale218775
Butler212266
Fayette208960
Henry187844
Cherokee182044
Randolph176941
Monroe171440
Washington164038
Macon154548
Clay149354
Crenshaw149257
Cleburne146041
Lamar139234
Lowndes136453
Wilcox124327
Bullock121340
Conecuh109028
Perry107926
Sumter102932
Coosa99228
Greene90734
Choctaw58724
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