By: 24/7 Staff, www.supplychain247.com, February 21st, 2018
Walmart is getting bruised in its battle with online leader Amazon, and the world's largest retailer yesterday reported a smaller-than-expected fourth-quarter profit as it wrestled with slower ecommerce sales during the busiest time of the year.
As reported by Bloomberg, Walmart Inc. fell the most in more than two years after delivering a disappointing annual profit forecast, sparking fears that its bid to catch up with Amazon.com Inc. online is losing momentum.
The world’s largest retailer expects earnings of $4.75 to $5 a share this fiscal year, excluding some items, compared with an average Wall Street estimate of $5.13.
Though Walmart’s sales last quarter topped projections, the results reflected a slowdown in online orders - a key metric in its battle to fend off Amazon.com Inc.
“We were a bit lower than plan” in e-commerce, Walmart's executive vice president and chief financial officer Brett Biggs said in an interview.
“We had a few operational issues from an inventory replenishment perspective,” he said, declining to provide specifics.
The shares fell as much as 9.5 percent to $94.80 in New York Tuesday, the biggest intraday decline since October 2015. They had gained 6.1 percent this year through Friday’s close.
Walmart's online expansion decelerated in its latest quarter
Source: Walmart | Note: Fiscal year ends Jan. 31
Walmart can’t afford to lose ground as rival Amazon poaches shoppers and pushes into new arenas like health care, which has prompted a scramble for consolidation including the union of CVS Health and insurer Aetna Inc.
Yesterday, grocer Albertsons Cos. said it would buy the part of drug-store chain Rite Aid Corp. that isn’t being sold to Walgreens Boots Alliance Inc. Insurer Humana Inc. and drug-plan administrator Express Scripts Holding Co. could also be potential takeout targets, according to analysts.
“There’s a lot of retail consolidation happening, and it will continue to happen,” Biggs said. “Health care is really important to us. If there are ways to serve our customers better, we will look at that.”
At the same time, Walmart Chief Executive Officer Doug McMillon is trying to convert the company’s brick-and-mortar shoppers into online customers, who spend almost twice as much overall and seek out higher-priced items.
At Walmart’s U.S. eCommerce unit, sales rose 23 percent last quarter. That’s less than half the pace of previous periods.
The Bentonville, Arkansas-based company had been getting a tailwind from its acquisition of Jet.com, an online upstart that it bought in 2016. Still, the company maintained its full-year forecast for online sales growth of about 40 percent.
“They do not associate Walmart with online or they default to Amazon,” he said in a note.
“This is a tough nut for Walmart to crack, and one that it can only break by more heavily marketing its services and proposition.” Neil Saunders, GlobalData Retail
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