Wal-Mart's online sales jump 29% as it works to make inroads against Amazon

Wal-Mart's online sales soared 29% in its fourth quarter, although the company's profit was down.

By Associated Press

Feb. 21, 2017 3:45 PM PT

The nation’s largest retailer keeps working to make headway against the largest online seller.

Wal-Mart Stores Inc. drew more shoppers to its namesake stores in the United States and its online sales soared 29% in its fiscal fourth quarter, which covers the crucial holiday shopping season. That’s an indication that its efforts to lower prices and improve Web services are helping it compete better against Amazon.com Inc., which has built fierce loyalty with its Prime two-day shipping program.

Like other traditional retailers, Wal-Mart has been trying to improve its online operations to challenge Amazon, which accounted for 33% of total U.S. online sales last year, according to the research firm Euromonitor. Wal-Mart moved into second place last year ahead of EBay Inc., accounting for 7.8% of online sales, up from 7.4% in 2015. Still, Wal-Mart’s online sales account for only about 3% of its global sales, or about $14 billion. That compares with $94 billion in global net product sales for Amazon.com.

The holiday shopping season was tough for many retailers, underscoring the changes they need to make. Macy’s reported another quarter of sluggish sales, even as it has been scrambling for new ways to bring shoppers in and beef up online services. And Target Corp., one of Wal-Mart’s main rivals, warned last month of weak sales for the holiday season. It reports final figures next week.

“We believe Wal-Mart is continuing to generate critical and increasing traction online,” Moody’s retail analyst Charlie O’Shea said.

Wal-Mart has retooled its online shopping programs and bought up some smaller companies with online strengths. And its aggressive effort to harness the power of its huge number of stores with its online business is starting to take form.

“We’re moving with speed to become more of a digital enterprise and better serve our customers,” Chief Executive Doug McMillon said in a statement.

Last year, Wal-Mart spent more than $3 billion for Jet.com in a deal aimed at helping it attract younger and more affluent customers.

Since then, it bought online footwear retailer ShoeBuy.com for $70 million and the outdoor and gear seller Moosejaw for $51 million. These sites are operating as standalone sites. Last year, Wal-Mart also raised its stake in JD.com, China’s No. 2 e-commerce site.

Marc Lore, the Jet.com founder who is now CEO of Walmart.com, said Tuesday that the company is still looking for new start-ups to buy. Under Lore, the company has quadrupled the number of items available on its third-party online marketplace to more than 35 million.

Wal-Mart said it’s working to accelerate the integration between Walmart.com and Jet.com, and trying to take advantage of its scale in areas like shipping and sharing its product selection.

Moving closer to the terms of Amazon’s powerhouse Prime program, Wal-Mart is now offering free two-day shipping on online orders of its most popular items with a minimum purchase order of $35. Amazon Prime costs $99 a year, but it comes with services such as streaming music and video.

Wal-Mart executives said Tuesday that shoppers are responding well to the two-day shipping program. In a move to rival Wal-Mart’s latest tactic, Amazon, however, quietly posted on its website over the weekend that it was dropping threshold for free shipping for non-Prime members to $35 from $50. But that applies to standard shipping of five to eight days, not two-day delivery.

Besides melding its online and store businesses so shoppers can jump back and forth, Wal-Mart has launched changes designed to make its stores cleaner and its customer service friendlier and faster. The company has invested $2.7 billion in higher wages and training for workers, a move that it says has helped to lower turnover and improve customer service.

Wal-Mart saw the biggest gain in a key revenue measure in its U.S. business in four years, marking the 10th consecutive increase. The number of customers rose for the ninth straight quarter. And the online sales gain of 29%, up from a gain of 20.6% in the previous period, marked the third straight quarter of gains.

Still, Wal-Mart is feeling some short-term pain. It reported fourth-quarter earnings that fell 18% as it spent money on online upgrades and stores. The results did beat Wall Street expectations. And total sales were hurt by a stronger U.S. dollar, which is making its international business more challenging.

Wal-Mart also said Tuesday that it has seen sales weaken at the beginning of the first quarter, in part because of a slowdown in tax refunds amid a new tax rule. And it warned that any tax on imported goods, as in a proposal that Republicans in Congress have floated, would raise prices and hurt shoppers.

The Bentonville, Ark., company earned $3.76 billion, or $1.22 a share, in the three months that ended Jan. 31. That compares with $4.57 billion, or $1.43, in the year-earlier quarter. Excluding certain items, earnings per share were $1.30. Sales excluding membership fees rose 0.8% to $129.75 billion.

Analysts had expected earnings of $1.28 a share on revenue of $131.13 billion, according to FactSet.

The company forecasts earnings per share of 90 cents to $1 for the first quarter and $4.20 to $4.40 for the year. Analysts expect 96 cents a share for the first quarter and $4.32 a share for the year, according to FactSet.

Wal-Mart shares rose 3% to $71.45 on Tuesday.

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