Strategy

E-Commerce to Power Walmart Sales in 2019

"No doubt we are in a transformational period of history. Our future is looking more digital," says CEO Doug McMillon.
Matthew HellerOctober 10, 2017

Wal-Mart Stores shares rose to the highest level in two years on Tuesday after the retailer predicted continued strong growth in online sales as it competes aggressively with Amazon.

The Walmart chain’s U.S. e-commerce sales increased 60% in the last quarter, reflecting its efforts to integrate brick-and-mortar stores and digital with initiatives such as offering discounts if shoppers pick up an online order in a store.

Wal-Mart has also invested in e-commerce by acquiring jet.com for $3 billion, as well smaller players like ModCloth, Moosejaw, and Bonobos.

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Ahead of its annual meeting for the investment community on Tuesday, the company forecast growth of 40% in Walmart U.S. online sales for fiscal 2019. Consolidated net sales are expected to increase at or above 3%, driven by comp-sales and e-commerce growth.

“No doubt we are in a transformational period of history,” CEO Doug McMillon told investors. “Our future is looking more digital.”

Investors reacted positively to the guidance, driving Wal-Mart shares up 4.5% to $84.13. Wal-Mart also announced it would buy back $20 billion of its shares over the next two years, replacing the existing $20 billion program announced in October 2015.

“Our financial position is strong, which allows us to invest in the business while returning significant cash to shareholders,” CFO Brett Biggs said.

As Fortune reports, “The world’s largest retailer, for years slow to respond to Amazon.com in the digital wars, has been on a tear in recent quarters.” Customers can now pick up online grocery orders at 1,000 of Walmart’s 4,700-plus stores and the chain is deploying digital kiosks at a hundred stores to dispense products bought on Walmart.com.

Wal-Mart has warned, however, that current-quarter profit could miss market estimates as margins are hurt by price-cutting and heavy spending on e-commerce.

“We still believe Amazon’s lead in online retail is insurmountable,” Moody’s retail analyst Charlie O’Shea told Fortune. “However, Walmart continues to widen the gap between itself and all other brick-and-mortar retailers by leveraging its unmatched physical resources.”