Updated February 20, 4:47 p.m.
Retail giant Walmart is on a roll, hitting a milestone in e-commerce sales this year and beating fourth-quarter profit expectations.
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Brick-and-mortar giant Walmart saw its e-commerce sales grow 23% to more than $100 billion for the first time last year, putting it ahead of Amazon, which still has a big lead after its merchandise sales rose 5.3% last year to $255.9 billion.
But expanding into new territory with nine-figure sales gives Walmart new leverage as it pursues its own growth while also chasing Amazon.
“Scale has helped us a lot,” President and CEO Doug McMillon said on a conference call with analysts.
Walmart is reaching shoppers with an omnichannel in-store and online plan, from renovating stores to streamline shopper presentations on the front end to using its supply chain to speed delivery on the back end.
Now it's all about bringing it all together on a grand scale.
“We're in execute mode,” McMillon said. “We believe we can grow because we're positioned to deliver what our customers and members want. We can deliver value and convenience. And the supply chain is changing to become more intelligent, more connected and more automated, which will help us execute better.”
And Walmart is moving further into tech, announcing a deal on Tuesday to buy connected home and TV company Vizio for $2.3 billion, as it seeks to solidify its growth amid expectations of somewhat slower sales trends over the coming year.
Excluding gains from Walmart's own investments, adjusted earnings for the fourth quarter were $1.80 a share, 16 cents above the $1.64 that analysts had expected, according to FactSet. Net income still fell 12.4% to $5.5 billion.
Investors approved of Walmart shares on Tuesday, which rose 3.2% to trade at $175.86.
Walmart isn't yet profitable from e-commerce, but it's getting closer.
The company plans to eventually make a profit from selling its online products, but aims to do so initially with the help of related businesses such as advertising and fulfillment services for brands selling on its online marketplace.
Revenue rose 5.7% to $173.4 billion in the quarter ended Jan. 26, on a 23% increase in e-commerce sales and a 33% increase in the company's advertising business, which it sees as a growth engine.
Walmart's U.S. same-store sales rose 4 percent, but the company said strength in its grocery and health and wellness categories was offset by “weaker general merchandise sales.”
General merchandise sales declined low single digits due to deflation, or falling prices, which led to declines in household goods, seasonal goods and toys.
“Our general merchandise prices are lower in some categories than they were a year ago or even two years ago, which means customers are finding value in areas like apparel and hardlines,” McMillon said.
Despite the decline in sales, sales of fashion, home goods and hardlines increased, signaling market share growth and that new customers, including households earning more than $100,000 a year, are shopping at Walmart.
Excluding the fuel business, the number of transactions at Walmart's U.S. branches increased 4.3%, but the average ticket price fell 0.3%.
“We're seeing more customers. We're seeing customers more frequently and we're generating a lot of new customers. Our average weekly e-commerce customer traffic increased 17 percent, which is a strong number. We're seeing more customers using our same-day and express services, and that's across a broad range of segments,” said John Furner, CEO and president of Walmart U.S.
“Shortening the last mile is a key component of e-commerce, and having stores be able to deliver what would traditionally be an e-commerce order, a food delivery order or both really helps brands,” Furner said.
Walmart's total revenue for the full year rose 6% to $648.1 billion. The retail giant expects revenue to continue growing this year, albeit at a slower pace, with net sales expected to increase 3% to 4% this year.
Walmart got to that size through years of steady growth over decades, but in recent years it has gained a new profile with a renewed focus on e-commerce and automation, and a more agile positioning to push new ideas further than ever before.
McMillon said, “We already offer express shipping in the US, so customers can get their orders quickly. But what if you need it delivered even faster? Let's say you have a pot of chili on the stove, but realize you forgot your chili seasoning. Drone delivery can get you there in under 15 minutes. Drone delivery is not new to us. Over the past two years, we've operated 37 locations across seven states and completed 20,000 deliveries. By the end of this year, it will be available to approximately 75% of households in Dallas-Fort Worth.”
Maybe that's how Walmart captures the next $650 billion in sales?
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