Financial Performance

Walmart Online Sales Growth Slows to 23%

The company cited "operational challenges" in fulfilling orders but the slowdown "reflects a broader challenge at Walmart" as it plays catch-up wit...
Matthew HellerFebruary 20, 2018

Walmart shares tumbled more than 9% on Tuesday after the retail giant reported that online sales growth slowed amid “operational challenges” at its fulfillment centers during the holidays.

For the fourth quarter, Walmart’s total revenue increased 4.1% to $136.3 billion, beating analysts’ estimates of $134.9 billion. The company also continued its three-year stretch of same-store sales growth in the U.S., with a 2.6% gain that exceeded estimates of 2%.

Online sales rose 23% but that was below the 29% growth in the year-ago period and the 50% surge in the third quarter. Amazon posted North American sales growth of 40% during the holiday quarter.

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Walmart said a large influx of electronics, toys and other seasonal items had made it difficult to fulfill sales of everyday products. “We are building a business,” CEO Doug McMillon said in an earnings call. “We are learning something new.”

But Erik Gordon, a professor at the Ross School of Business at the University of Michigan, told Reuters that Walmart’s inventory challenges raised questions about its preparedness to fight Amazon.

“The slowdown reflects a broader challenge at Walmart, which has dominated the retail industry for decades with its extensive store network but is now playing catch up in the e-commerce realm with Amazon, which captures half of all online spending,” The New York Times said.

Walmart has expanded its e-commerce offerings by purchasing for $3.3 billion and the online clothing retailers Bonobos and Modcloth. At the time, the Jet deal was the largest deal ever for an e-commerce company and it was responsible for the large growth rates of previous quarters.

“Jet will go through adjustment but it will grow again,” McMillon said on Tuesday.

The company is expecting online sales to rise 40% over the next year as it accelerates its web-based grocery business, increasing the number of stores where customers can order food online and pick it up in stores. It is also investing more in its website on a national basis and reducing marketing in Jet, which targets high-income urban and millennial shoppers.