Walmart's online bets paying dividends in the age of Amazon

Retailer's food business had the strongest quarterly performance in nearly six years
11/17/2017

A surging online business and strong food sales boosted Walmart's results Thursday ahead of the holiday season.

Walmart's huge investments in its online business and its fleet is paying off. Since buying Jet.com for more than $3 billion last year, Walmart has added online services, acquired brands such as Bonobos and ModCloth and vastly expanded the number of items on its site.

"Walmart's online performance continues to validate its substantial investments in this critical channel including its purchase of Jet.com," Moody's lead retail analyst Charlie O'Shea said in a note.

E-commerce sales grew 50%, though Walmart has a long way to get even close to Amazon's dominance online. Walmart said in October that U.S. e-commerce sales should be about $11.5 billion this year and it expected global e-commerce to be $17.5 billion. That's still less than 4% of overall sales. That compares with Amazon's $94.66 billion in the last calendar year.

Amazon has been building its network of services too, using its $99-a-year Prime membership with same-day and even one-hour shipping options to develop loyalty. And Amazon's purchase of Whole Foods Market this past summer has raised the competitive stakes in the food business.

Walmart said its food business, critical to drawing shoppers into its stores, had the strongest quarterly performance in nearly six years.

Overall, Walmart posted quarterly revenue of $123.18 billion, surpassing Wall Street forecasts of $121.05 billion. Sales at stores open at least a year rose 2.7% for the U.S. division, the biggest gain since the first quarter of 2009. Customer counts rose 1.5%, and Walmart said shoppers added one extra item to their cart, which helped boost sales.

The company has been aggressively cutting prices and has overhauled its shipping strategy and is planning to double the number of store-curb pickup for groceries ordered online to 2,000 by next year.

Walmart has also aligned with Google on voice shopping, as it tries to chip away the dominance of Amazon's Alexa-powered Echo devices.

"Curiosity, creativity, decisiveness and speed are priorities," Doug McMillon, Walmart's CEO, said in a prerecorded statement.

For the holiday shopping season, Walmart wants to keep that momentum going. It's hoping to tempt shoppers with online deals before Black Friday, and started some online deals a week ago.

The Bentonville, Arkansas-based company earned $1.75 billion in the third quarter.

 

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