US retailer Walmart posted some softness in sales growth following a difficult holiday quarter, but record sales growth in e-commerce indicates how the company’s attempt to compete with Amazon is paying off.
The basics: Walmart’s sales rose just 2.1% year-over-year in the quarter ending on 31st Jan 2020, a marked slowdown from the 3.2% increase the year before.
However, it is worth pointing out that last year’s holiday period was uncommonly strong, as the FT observes, partly down to the closure of Toys R Us, diverting much of that spending Walmart’s way. Full year growth came in at 1.9%.
Though Walmart is often the focus of intense scrutiny for signs of a wider economic malaise, most retailers with a physical footprint saw a weak holiday season. Everybody except Amazon, that is.
The important part: Though analysts had estimated a slight slowdown and had noted that gross margins would probably feel the pressure from increased investment. However, with 37% growth in e-commerce sales growth, Walmart beat its own target by two percentage points. It expects this growth to slow slightly in the coming year.
Oddly, it is only because of a large physical presence that Walmart is safe to invest, as its vast footprint still brings in more than half of US sales. On this basis, it remains a larger retailer than Amazon, but in all the other areas in which the Seattle-based giant competes, Walmart trails.
Driving e-commerce growth: The company’s e-commerce division though very much in a growth phase, with groceries performing particularly well, remains unprofitable. It is unclear whether online grocery sales will ever be profitable, though if anybody has the network to make it happen, it’s probably Walmart.
Irons in the fire: Understanding the sheer range of areas into which Walmart is trying to expand puts the scale of its challenge into perspective, given that its presence in these spaces is so often in response to Amazon.
Look, for instance, to its Vudu streaming platform, which last year extended its video advertising offer. More broadly, it is leveraging its retail data through a self-service ad product, part of an increasingly lucrative trend of e-commerce media.
Sourced from Nasdaq, FT, CNBC, WARC