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Walmart's online sales grow 33%

Walmart's online sales are growing and Americans still flood into its stores.Digital sales jumped 33% last qua...

Posted: May 17, 2018 9:59 PM
Updated: May 17, 2018 9:59 PM

Walmart's online sales are growing and Americans still flood into its stores.

Digital sales jumped 33% last quarter, Walmart said Thursday. Wall Street was glued to that number because CEO Doug McMillon is scrambling to transform the world's largest brick-and-mortar retailer for the digital era.

Walmart expects online sales to increase 40% for the full year. E-commerce makes up only 4% of sales in the United States, estimated Laura Kennedy, vice president of retail insights at Kantar Consulting.

"The real issue with Walmart is that most of what they sell is food and people don't buy food online," she said.

Walmart has embarked on an ambitious long-term plan to shift perceptions of its brand. It wants to build its customer base from low- and middle-income households to younger, wealthier Americans captivated by Amazon.

Related: How Whole Foods will help Amazon rule the world

"We are changing from within to be faster and more digital, while shaping our portfolio of businesses for the future," McMillon said in a news release Thursday.

Retooling abroad has been Walmart's focus in recent months as it searches for growth and market share.

Walmart pulled back on a mature UK market by selling control of supermarket chain Asda and struck a $16 billion deal for Flipkart in India, the largest purchase in its history. It will take years for Flipkart to make a profit, but Walmart believes it can unlock India's approximately $200 billion online market.

Related: What is Walmart's global plan?

It has also gobbled up niche retailers such as ModCloth, Bonobos, Moosejaw and Hayneedle to expand its online muscle. On Wednesday, it announced a partnership with fashion chain Lord & Taylor for a landing page on the website.

But Walmart's biggest move in the United States, a $3 billion deal for Jet.com, has disappointed investors. Walmart is scaled back marketing on Jet except in urban areas while deploying its newly-redesigned website in mid-America.

Related: Meet the new Walmart customer: Higher-end and digital-savvy

"Walmart is just a really well-known brand for value throughout the country," McMillon said in February. "When you get into Oklahoma and Texas, in the middle of the country, it just makes a lot of sense to invest in that brand."

The retailer's success chasing online dollars has been mixed so far. In the fourth quarter, Walmart's online growth slowed to 23% after strong 50% and 60% gains the previous two quarters.

Walmart miscalculated how much inventory it would need to keep pace with soaring demand during the holiday shopping season. Those supply-chain growing pains sparked a Wall Street selloff. Walmart's stock had its worst day in 30 years, and it still hasn't recovered: It's down 13% this year.

Related: Walmart figured out its Amazon strategy. So why's the stock down 13%?

Wall Street shrugged off what McMillon called a "solid" quarter Thursday. Shares fell 2%.

Sales at Walmart's 4,760 US stores that have been open for at least a year rose 2.1% and foot traffic was up 0.8%. Ticket sizes also jumped. All three measures signal that shoppers continue to head to Walmart's stores frequently and are spending more money when they shop. A colder April hurt traffic, the company said.

Walmart isn't building new stores, instead remodeling 1,500, raising employee wages, and tightening demands on suppliers to squeeze out every dollar from existing locations.

"Today's results are proof not only that Walmart is making gains in its day-to-day business, but that it is now a company firmly in the midst of a dramatic transition," Neil Saunders, managing director of GlobalData Retail, said in an email.

Walmart's expansion of home grocery delivery and curbside pickup contributed half of the same-store sales growth. Online grocery has failed to take hold in the United States, but analysts expect it to grow in the future.

Grocery accounts for more than half of Walmart's $500 billion in annual sales, and the company's future depends on its ability to compete with Amazon as it wades into the battle with Whole Foods. Kroger stepped up its digital capabilities Thursday by taking a minority stake in British online supermarket chain Ocado to leverage its delivery tech.

Walmart's link to nearly every US household - 90% of the country lives within 10 miles of a store - could give it an advantage in the race, argues Cowen analyst Oliver Chen. Walmart can offer customers a rare combination of curbside pickup and buy online, pickup in store - so-called "click and collect." That could help it keep down costly delivery charges.

But investments in online grocery are weighing on profit. Walmart's margins in the United States shrank 3.1% from a year ago.

Cheaper prices also cut into profit. Walmart has lowered prices at stores to stay ahead of competitors. "If they are nothing else, they have to be the everyday low price provider," Kennedy said.

Higher oil and third-party shipping costs dented the company's bottom line, too. America's truck driving shortage has impacted nearly every big company in the country.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 313942

Reported Deaths: 7240
CountyCasesDeaths
DeSoto21580258
Hinds20330415
Harrison17879309
Rankin13594278
Jackson13429246
Madison10088217
Lee9970174
Jones8370163
Forrest7670152
Lauderdale7188241
Lowndes6387146
Lamar622486
Lafayette6184118
Washington5332133
Bolivar4801132
Oktibbeha462198
Panola4582106
Pearl River4506146
Marshall4435103
Warren4386121
Pontotoc420172
Monroe4107133
Union410076
Neshoba4030176
Lincoln3962110
Hancock378486
Leflore3493125
Sunflower335990
Tate333384
Pike3316105
Scott315773
Alcorn312768
Yazoo311469
Itawamba299777
Copiah296865
Coahoma295179
Simpson294988
Tippah288168
Prentiss279760
Adams278782
Marion269080
Leake267473
Wayne262641
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Covington258281
George247848
Newton246261
Winston227081
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Jasper221048
Attala214273
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Holmes188873
Clay185254
Stone182433
Tallahatchie178541
Clarke177980
Calhoun170532
Yalobusha164238
Smith162334
Walthall133945
Greene130533
Lawrence128524
Montgomery126742
Noxubee126734
Perry126338
Amite123042
Carroll121828
Webster114532
Jefferson Davis107033
Tunica105226
Claiborne102430
Benton99525
Humphreys96533
Kemper95728
Franklin83623
Quitman80716
Choctaw76318
Wilkinson67230
Jefferson65528
Sharkey50217
Issaquena1686
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Alabama Coronavirus Cases

Cases: 531404

Reported Deaths: 10985
CountyCasesDeaths
Jefferson765501522
Mobile41036805
Madison34789503
Tuscaloosa25788453
Montgomery24340589
Shelby23449249
Baldwin21154308
Lee15882171
Calhoun14511314
Morgan14306279
Etowah13843353
Marshall12232223
Houston10570281
Elmore10068205
Limestone9974151
Cullman9676194
St. Clair9661243
Lauderdale9427241
DeKalb8831186
Talladega8227176
Walker7241277
Autauga6926108
Jackson6814112
Blount6678137
Colbert6306134
Coffee5519119
Dale4838111
Russell441538
Chilton4296112
Franklin426082
Covington4129118
Tallapoosa4023152
Escambia393677
Chambers3573123
Dallas3551152
Clarke351161
Marion3122101
Pike310977
Lawrence300398
Winston274473
Bibb260964
Geneva250477
Marengo249564
Pickens234461
Barbour231057
Hale223077
Butler216069
Fayette212562
Henry188844
Cherokee185245
Randolph180542
Monroe177540
Washington167339
Macon159650
Clay156756
Crenshaw152557
Cleburne148941
Lamar142535
Lowndes138853
Wilcox127130
Bullock122841
Conecuh110529
Perry107726
Coosa107628
Sumter104732
Greene92534
Choctaw60724
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