Walmart’s (NYSE: WMT) stock just slipped…
One of the world’s largest retailers reported a fourth-quarter profit on Tuesday, February 20th, that was less than what was expected.
Investors weren’t pleased with what they saw when Walmart reported its fourth-quarter results.
Walmart opened up on Tuesday, February 20th, with a share price of $104.63 and closed out that same day at $94.11. That’s a 10% decrease in one day.
It wasn’t a good day for Walmart, to say the least.
Walmart’s CEO Doug McMillon said in a statement: “A smaller portion of the slowdown was unexpected, as we experienced some operational challenges that negatively impacted growth.”
Pressure to Build up E-Commerce
Walmart has been working hard to grow and reinforce its e-commerce since last year. It’s been challenging, but it’s what needs to be done in order for the company to stay in competition with Amazon.
A few of the ways that Walmart aimed to do this was through picking up online brands Bonobos and ModCloth, adding more features to its shopping app, and equipping stores with the resources to handle curbside grocery pickup for online orders.
The company can’t afford to get left behind because Amazon has become such huge competition in recent years and will only continue doing so.
And even though Walmart is making a conscious effort to build up its e-commerce business, it all comes at a price.
In fact, in recent years, Walmart’s e-commerce efforts have cost it billions of dollars. Of course, Walmart has been assuring its investors that its efforts will pay off and it will be in a strategic spot when it comes to rivaling Amazon.
Walmart’s online sales were up 23%, compared to a year ago, but this didn’t even come close to the 50% growth that it saw during the first nine months of the fiscal year.
One of the factors playing a huge role in Walmart’s slump in growth was that the company has been running out of some of its items at its online-fulfillment centers.
McMillon said: “We’re learning how to deal with higher volumes and learning how to deal with a higher peak than what we had previously.”
Walmart is still trying to figure out e-commerce. A year ago, the company launched free two-day shipping on online purchases of $35 or more. Its rival, Amazon, doesn’t do this.
In order to receive free shipping with Amazon, you need to be a part of its annual Prime membership, which costs members a whopping $99 a year…
Can Online Sales Growth Save Walmart?
Walmart is trying to direct its customers to buying online and to buying from its company. E-commerce makes up almost 4% of Walmart’s over-$500 billion in annual revenue. And while this does seem minuscule at the moment, it is growth.
Not to mention, this is the company’s first real attempt at e-commerce. It tried back in the early 1990s, but there wasn’t any traction yet in e-commerce, so Walmart continued to open more stores.
Walmart is over twice as big as Amazon, but Amazon has been perfecting its supply chain and e-commerce business for almost a decade.
For its new fiscal year, Walmart is hoping to bring its online sales growth up to 40%. This suggests that executives believe that they can iron out the problems they encountered during the fourth quarter, forge ahead, and grow.
Walmart also saw same-store sales rise 2.6% during the holiday quarter in the U.S, which is Walmart’s 14th-consecutive increase. The company witnessed a rise of 1.6% in shopper visits. This is all well and good for keeping Walmart afloat, but the company still really does need to dive headfirst into e-commerce.
Walmart should specifically focus on its grocery business. It’s already established an in-store pickup program and has been building customer loyalty. Its grocery portion accounted for more than half of its sales in fiscal 2017.
It’s obvious why Walmart’s stock tumbled really quickly after reporting its fourth-quarter earnings, but I don’t think we should lose all hope for Walmart and its e-commerce efforts. It’ll take some time for the company to establish a solid supply chain, but it’ll be worth it in the end.
Until next time,
Jennifer Clark
Pro Trader Today