News

Wal-Mart bounces back to double-digit online growth in Q2

August 18, 2016 01:10 PM
http://www.internetretailer.com/static/uploads/thumbs/Doug_McMillon_Wal-Mart_CEO_jpg_78x78_crop_q95.jpg

Even Wal-Mart’s CEO Doug McMillon admitted the big retailer’s 7% growth in online sales in the first quarter of its fiscal year wasn’t good enough, and that sluggish growth was widely cited when Wal-Mart Stores Inc. announced this month it would acquire Jet.com. Wal-Mart’s second quarter results announced today show somewhat better online growth.

Wal-Mart reported today that global sales on its 11 e-commerce sites around the world increased 11.8% year over year, when factoring out the strengthening dollar that reduces sales in dollar terms on Wal-Mart’s e-retail sites outside of the United States. That was the retailer’s strongest online growth since reporting a 16% e-commerce gain in the same quarter a year ago, an increase that also excluded currency factors.

McMillon cited “progress in e-commerce” in a prepared presentation that accompanied the earnings release. He also noted that online sales growth was stronger in the United States than in major international markets.

“This was primarily due to the growth in our marketplace offering in the U.S., the continued rollout of online grocery and growth of pickup in stores and clubs,” he said. “We continue to see proof that our customers enjoy a seamless shopping experience. The distinctions that we talk about today between stores, apps, pickup, delivery and sites are continuing to blur into the background for customers. For them, it’s just Wal-Mart.”

While Wal-Mart did not break out its online sales growth in the U.S., it said e-commerce contributed roughly a fourth of the 1.6% increase in Q2 comparable-store sales in the United States. For its Sam's Club warehouse stores e-commerce accounted for all of the 0.6% comp-store sales growth, as Wal-Mart noted strong results from store pickup of online orders and direct-to-home shipments.

The retailer noted that the gross merchandise value of goods sold on its websites worldwide increased 13.0%, an indication that the growing number of outside retailers selling on Wal-Mart’s sites are contributing to online growth. GMV growth in the first quarter was only 7.5% on a constant-currency basis. While Wal-Mart's online sales growth picked up in the May-July period, it still falls short of U.S. e-commerce growth, which was 15.8% during the April-June quarter, according to the U.S. Department of Commerce.

Wal-Mart has added 7 million SKUs to its online assortment since the beginning of the year, and now offers 15 million SKUs online, McMillon said. Much of that growth comes from more retailers selling on Walmart.com. In 2013, when Walmart.com only offered 2 million SKUs, Wal-Mart executives outlined a plan to increase its online assortment by bringing in other merchants to sell on Wal-Mart sites.

McMillon also pointed to Wal-Mart’s expansion of its service allowing consumers to order groceries online and pick them up at Wal-Mart stores. “Customers also continue to enjoy our online grocery pickup service and give it high marks,” he said. “We added grocery pickup to 30 more markets this quarter bringing our total to more than 60 markets and nearly 400 locations.” That leaves considerable room for growth, as Wal-Mart operates 3,499 “supercenters” in the United States that offer groceries as well as general merchandise, and 668 “neighborhood markets” with a smaller selection of groceries and other items.

Wal-Mart is No. 4 in the Internet Retailer 2016 Top 500, which ranks North American retailers by their online sales.

Addressing Wal-Mart’s announced acquisition of online marketplace Jet.com for $3.3 billion, McMillon said Jet.com’s technology “rewards customers in real time with savings on a basket of goods and puts them more in charge of the price they pay. This empowers customers in a way that is true to the spirit of Walmart.”

The Wal-Mart CEO pointed to the technology developed by year-old Jet.com that lets consumers lower their per-item costs by ordering more items and agreeing to wait longer for delivery. “When customers build a basket of goods online rather than ordering one item at a time, shipping economics are in their favor and ours,” McMillon said. “Walmart’s advantage has always been in providing the lowest prices on a basket, and Jet has created a unique way to deliver the lowest-cost basket online.”

Wal-Mart’s acquisition of Jet was widely seen as an attempt by the world’s largest retailer by sales to accelerate online sales and make up ground it’s lost to Amazon.com Inc., No. 1 in the Top 500. Wal-Mart expects the Jet deal to close early in its fiscal fourth quarter.

McMillon reiterated that Neil Ashe, Wal-Mart’s global e-commerce chief, will be leaving the company at the end of the fiscal year. In the interim, McMillon said, Ashe “will be working on our e-commerce strategies in several international markets.” Jet founder and CEO Marc Lore will assume control of Wal-Mart’s e-commerce operation in the U.S. once the deal closes, including both Walmart.com and Jet.com.

McMillon also highlighted Wal-Mart’s acquisition in June of a 5% stake in JD.com, No. 1 in the  Internet Retailer 2016 China 500. In that deal Wal-Mart transferred to JD.com its Yihaodian e-commerce site in China.

For its fiscal second quarter ended July 29, Wal-Mart reported:

  • Total revenue of $120.854 billion, an increase of 0.5% over $120.229 billion in the same quarter a year ago. After factoring out currency fluctuations, revenue growth was 2.8%.
  • Operating income of $6.165 billion, a 1.6% increase from $6.069 billion. That included a one-time gain of $535 million from its sale of Yihaodian to JD.com. Without this gain, operating income declined 7.2%, which Wal-Mart attributed to “investments in people and technology” and the unfavorable impact of currency fluctuations.

For the first half of its 2017 fiscal year, Wal-Mart has reported:

  • Total revenue of $236.758, an increase of 0.7% from $235.055 in the first half of last year.
  • Operating income of $11.440 billion, a decline of 2.6% from $11.749 billion.
  • Wal-Mart does not break out e-commerce sales in dollars, though it reported that e-commerce worldwide increased 7.0% in the first quarter on a constant-currency basis.

Wal-Mart sold $13.7 billion on its global e-commerce sites in 2015, according to Top500Guide.com, growth of 16.3% over the prior year. However, Wal-Mart’s online growth has slowed from 21.0% growth in its 2015 fiscal year and 30.3% growth in fiscal 2014.

 

Back

 

Top Solution Providers

close