Retailing Giant Struggling to Boost Online Sales
The world’s largest retailer doesn’t have good news for investors.
Shares of Wal-Mart Stores, Inc. (NYSE:WMT) declined more than three percent after the retailer reported U.S. comparable sales increase in its third fiscal quarter, which missed Wall Street forecasts.
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The slower-than-expected sales were hurt in part by lower food prices.
In the third quarter, sales at established U.S. stores grew by 1.2% from the year before, marking two years of positive sales growth, though the metric missed analyst estimates and marked a deceleration from the previous quarter. (Source: “Walmart reports Q3 FY17 EPS of $0.98,” Wal-Mart Stores, Inc., November 17, 2016.)
Wal-Mart’s operating income dropped 10.4% in the quarter as labor and e-commerce investments continued eating into profits.
Walmart’s slight sales miss was unexpected, sending shares down around three percent to $69.19 at the close on Thursday.
But company’s management was optimistic about the sales outlook and its third-quarter performance.
“We had a solid third quarter. Our e-commerce growth accelerated, operations in the U.S. continued to strengthen and international delivered another solid performance,” said Wal-Mart President and CEO Doug McMillon in the earnings statement. “We’re positioned well for this important fourth quarter and wish everyone a happy, peaceful and prosperous holiday season.”
Wal-Mart had earlier told investors that it doesn’t plan to grow profits until 2019.
Analysts had been expecting growth of 1.3%. And growth in the number of shoppers who came into its U.S. stores also slowed, only increasing 0.7% and illustrating the challenge of mobilizing shoppers when they can simply go online. (Source: Ibid.)
Despite slightly dismal performance, e-commerce growth accelerated, rising 20.6% globally, with the U.S. outperforming other major markets.
Credits: Flickr.com/Mike Mozart
To boost its online sales, Wal-Mart acquired Jet.com this summer for $3.0 billion, to counter the increasing competition coming from Amazon.com, Inc. (NASDAQ:AMZN) and other small online retailers.
But with the majority of Wal-Mart sales coming from its brick-and-mortar stores, it’s still a long journey for this retailing to giant to transform itself into a complete e-commerce hub.
Wal-Mart is the largest retailer in the world, with nearly 260 million customers visiting the company’s more than 11,500 stores in 28 countries each week. In the company’s last fiscal year, it generated $482.0 billion of total revenue.
