Walmart’s Online Growth Slowed Dramatically Over the Holidays

Walmart Inc (WMT) reported a stellar holiday season if you consider U.S. sales and shopper visits.

But the retail giant’s e-commerce growth slowed to 23% in the quarter ended January 31, well below the 50% clip it had hit in the previous quarter. A good chunk of that was simple arithmetic as Walmart lapped its acquisition of a year earlier. At the same time, Walmart acknowledged that it had encountered some unspecified snafus that weighed on sales as it faced off with (AMZN) at retail’s busiest time of the year.

“A smaller portion of the slowdown was unexpected, as we experienced some operational challenges that negatively impacted growth,” Walmart CEO Doug McMillon said in a statement. The chief executive did say Walmart expects e-commerce growth to reignite and hit 40% for the new fiscal year.

Walmart has been busy beefing up its e-commerce in the last year, snapping up online brands like Bonobos and Modcloth, equipping hundreds more of its stores to handle curbside grocery pickup for online orders, and adding many more features to its shopping app.

Those efforts have cost the retailer billions in recent years, but Walmart has assured investors of the payoff. The store chain keenly aware that it cannot afford any slowdown at a time when key rival Amazon remains well ahead in market share and arguably in innovation, with such projects as cashier-free stores. Plus, there’s the looming question of what Amazon will end up doing with newly-acquired Whole Foods Market in the grocery space.

But the holiday quarter showed how pricey Walmart’s reinvention is. In the fourth quarter, adjusted earnings per share increased to $1.33 for the company as a whole, missing expectations of $1.37 per share, according to Thomson Reuters I/B/E/S. And those pressure will persist in 2019: Walmart expects earnings of $4.75 to $5 a share this fiscal year, excluding some items, compared with an average Wall Street estimate of $5.13.

Yet there is no doubt Walmart’s tech initiatives are bringing in shoppers. Same-store sales rose 2.6% during the holiday quarter in the U.S.— their 14th straight increase. And more crucially, shopper visits rose 1.6%, illustrating how Walmart’s efforts to integrate physical stores and e-commerce are paying off. Analysts had forecast U.S. comparable sales to rise 2%, according to research firm Consensus Metrix.

Walmart shares were down 3.6% to $100.99 in premarket trading.

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