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Wal-Mart's Online Sales Soar as Retail Giant Pursues Amazon

By Steve Wynne-Jones
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Wal-Mart's Online Sales Soar as Retail Giant Pursues Amazon

Wal-Mart Stores Inc. gained momentum in its fight against Amazon.com Inc., with its online sales growing at the fastest clip in at least five years.

The e-commerce business saw gross merchandise volume -- a measure of all the goods it sells online -- soar 69 percent in the first quarter, Wal-Mart said on Thursday. Total revenue climbed 1.4 percent to $117.5 billion.

The results signal that Wal-Mart is getting a payoff from an ambitious online expansion, which included last year’s $3.3 billion acquisition of Jet.com Inc. The Bentonville, Arkansas-based company now boasts 50 million items on its website, up from 35 million the previous quarter.

“All of a sudden, Wal-Mart is the primary competitor to Amazon, as opposed to a fragmented cluster of people,” said Greg Portell, a partner at consulting firm A.T. Kearney.

The shares gained as much as 1.2 percent to $76 in early trading after the results were released.

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Growth at Wal-Mart’s brick-and-mortar stores was more measured, though it still outpaced estimates. U.S. same-store sales rose 1.4 percent, beating the 1.3 percent gain projected by analysts. That marked the 11th-consecutive period of positive sales in the company’s home market.

Earnings amounted to $1 a share in the period, which ended April 30. Analysts had estimated 96 cents.

The company expects profit of $1 to $1.08 in the second quarter, compared with a projection of $1.07. U.S. same-store sales will grow 1.5 percent to 2 percent, Wal-Mart said.

“We’re encouraged by the start to the year,” Chief Executive Officer Doug McMillon said in a statement. “Our plan is gaining traction.”

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Jet Deal

McMillon has used the Jet acquisition as a catalyst for online growth. After buying that business in September, he put co-founder Marc Lore in charge of U.S. e-commerce. Wal-Mart followed up with some smaller deals, snapping up outdoor retailer Moosejaw and women’s apparel seller ModCloth earlier this year.

It’s also held talks to buy men’s clothing startup Bonobos Inc. for about $300 million, a person familiar with the matter said last month.

The deals have helped burnish Wal-Mart’s online image, though the majority of e-commerce growth came from its longstanding Walmart.com site last quarter.

Wal-Mart’s online expansion hasn’t come cheap. Its expenses grew faster than sales in the first quarter, Chief Financial Officer Brett Biggs said in an interview. Wal-Mart has pledged to reverse that trend over the course of the year.

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“We’re still not where we want to be,” Biggs said.

At the same time, Wal-Mart is striving to improve its brick-and-mortar experience. Cleaner aisles, faster checkouts and fewer missing items have been the focus for Wal-Mart’s U.S. stores chief Greg Foran. The New Zealander also is beefing up the retailer’s store-brand and services business to provide a buffer against both Amazon and German discounter Aldi.

He’s replaced the clunky handheld bar-code scanners used by employees since 1984, opened training facilities for 200,000 workers, and freed store managers from the backroom to spend more time on the sales floor.

“With all the hullabaloo online, it’s easy to forget that in-store execution still means the world to them,” said Jennifer Bartashus, an analyst at Bloomberg Intelligence.

News by Bloomberg, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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