Walmart’s (WMT) massive e-commerce investments are starting to pay off.
The discount chain reported on Thursday that U.S. online sales rose a staggering 63% in the first fiscal quarter of the year, following last year’s overhaul of its online marketplace and a series of acquisitions of e-commerce companies since then, most notably its $3 billion purchase of Jet.com.
And more importantly, Walmart said comparable sales rose 1.4% at its U.S. stores, the 11th consecutive quarterly rise, and brought in more shoppers than a year earlier, in stark contrast to the traffic problems at rivals ranging from Target (TGT) to Macy’s (M). Walmart has credited its efforts to integrate its store and digital businesses so that they feed off each other.
Following major improvements made to its online marketplaces a year ago to better compete with Amazon.com (AMZN) and eBay (EBAY), Walmart.com now sells 50 million first and third party items, up from 10 million a year ago (and 34 million a quarter ago).
Marc Lore, the jet.com founder who last year became head of Walmart’s U.S. e-commerce efforts declined on a media briefing to say how much of that growth was attributable to its marketplace. Such items are not included in Walmart’s in-store pick up and therefore less valuable in terms of fostering the interplay between stores and digital sales that Walmart is betting on to fight Amazon.
Still, Walmart has also made improvements to its shopping and payment apps, pushing customers to come into stores by offering them incentives such as line-busting privileges.
What’s more, it’s using e-commerce to try to direct more shoppers to stores to generate sales there while also protecting margins: Walmart recently started offering discounts for orders placed online but picked up in store, which saves shipping costs. But the retailer remains very far behind Amazon, whose online sales are about six times greater in the U.S.
“We need to scale our e-commerce business further and see some additional strength in our store comps to deliver the results we know we’re capable of,” Wal-Mart Stores CEO Doug McMillon said in a recording.
In addition to Jet.com, Walmart recently bought e-commerce companies ModCloth, ShoeBuy, and Moosejaw, but McMillon said those deals were small and meant to speed up innovation within Walmart.com. “The acquisitions have received a lot of attention but our plan in e-commerce is not to buy our way to success,” he said. Walmart said most of the e-commerce growth was organic rather than from those deals.
For the quarter ended April 30, Walmart earned $1 per share, above analysts’ average estimate of 96 cents, according to Thomson Reuters I/B/E/S. Net income fell to $3.04 billion from $3.08 billion, due to an increase in the tax rate. Walmart’s U.S. comparable sales were above the 1.3% growth analysts had been expecting, according to Consensus Metrix. For the current quarter, the retailer expects U.S. comparable sales to be up 1.5% to 2%. Walmart International sales fell 3.5% but stripping out the impact of the strong U.S. dollar, they slipped 0.8%. Sam’s Club, the bulk retailer operated by Wal-Mart, saw comparable sales rise 1.6% in the quarter.
Wal-Mart Stores shares rose 1.2% to $76 in pre-market trading, and were up about 9% in 2017 through Wednesday’s close.