Walmart’s $3.3 billion acquisition of e-Commerce site Jet.com already appears to be paying dividends for the retail giant. The brand boosted e-Commerce sales 21% in Q3, marking the retailer’s second straight quarterly increase in online sales.
The jump in online revenue was just the digital turnaround Walmart was looking for as it heats up its competition with e-Commerce giant Amazon. E-Commerce sales at Walmart had actually dipped for eight straight quarters prior to Q2, leaving the retailer desperate to make an impactful change to its digital offering. The acquisition benefited Walmart by providing access not only to Jet.com’s product and supply chain, but also to its dynamic pricing technology that could be implemented into Walmart.com.
In its Q3 earnings release, Walmart reported:
U.S. comparable store sales hit their ninth straight positive quarter, jumping 1.2%, with e-Commerce sales adding 0.5% to the figure, the channel’s largest contribution to date;
Revenue edged up 0.7% to $118.2 billion, just below analysts’ projections for $118.69 billion;
An additional eight million SKUs in its inventory;
Sam’s Club comparable store sales rose 1.4%; and
An operating income decrease of 10.4%, largely due to the company’s recent wage increases and investments in e-Commerce-related technology.
Despite the decline in profit, Walmart actually raised the low end of its expected full-year earnings per share from $4.15 to $4.20. The income decrease doesn’t appear to faze Walmart, which has continually made strides to invest further in e-Commerce. Considering e-Commerce accounted for only 3% of Walmart’s sales in Q2, yet is expected to account for 8.2% of retail sales in 2016 as a whole (according to eMarketer data), the retailer is seeking to take share from not just Amazon but also from the rest of the industry.
Walmart anticipates spending as much as $11 billion in 2017 on e-Commerce initiatives alone while slowing its store growth, instead preferring to invest in the stores it already operates.
For example, Walmart also said it expanded its grocery pickup service to 600 locations, up from 400 in Q2. As Amazon aims to vastly expand its brick-and-mortar space with a reach of as many as 2,000 small grocery locations, Walmart has to enhance its existing store footprint by offering more omnichannel fulfillment options for consumers.
With these investments, Walmart expects earnings to remain flat throughout calendar 2017 (which Walmart refers to as fiscal year 2018) before seeing its first significant profits in 2018.