Grocery boosts Walmart's online sales

Walmart raised its annual profit expectations after reporting strong third-quarter results helped by its grocery business.

The results, announced Thursday, offer encouraging news as it heads into the holiday shopping season and offer the latest evidence that Walmart is closing the gap between itself and online leader Amazon.

Walmart said sales at stores opened at least a year rose 3.2%, marking the 21st straight quarter of gains. Online grocery sales rose 41% helped by its expansion of grocery delivery service. Walmart now has more than 3,000 locations for grocery pickup and more than 1,400 locations that offer grocery delivery. This fall, it launched "Delivery Unlimited," which costs US$98 annually and $12.95 monthly for unlimited grocery delivery. It also launched a delivery service in three cities, giving customers the option to let its own delivery person put purchases directly into the refrigerator when they're not home.

Still, delivery wars are expected to be intensified this holiday season. Walmart and Amazon are locked in an arms race to bring packages faster and faster to customers' homes. Amazon offers a similar in-home service in certain cities, dropping off packages inside homes, garages or trunks. But its service doesn't deliver groceries.

And, both will be fighting it out with its new offering--next-day delivery services. Walmart has rolled out next-day delivery on its most popular items. Amazon has said that more than 10 million items now qualify for next-day delivery for Prime members who pay $119 a year. But Walmart may have to reconsider its new unlimited grocery delivery service--late last month, Amazon dropped its $15 monthly fee for its Amazon Fresh service, which delivers raw meat, vegetables and other groceries to customers' doorsteps. The service is only for its Prime members.

As a result of the continuing extra investments in online delivery, Walmart said operating income declined 5.4% to $4.72 billion during the fiscal third quarter.

Still, overall results were solid. It posted net income of $3.29 billion. Revenue rose to $127.99 billion in the period.

Walmart International, which includes operations in Canada, China, India, Mexico and the United Kingdom, reported US$29.2 billion in net sales for the quarter–an increase of 1.3%. Excluding currency, net sales were $30.2 billion, an increase of 4.8%.