Walmart CEO Says Online Business Still Has Lots of Work to Do

November 14, 2019, 4:01 PM UTC

Walmart on Thursday reported another stellar quarter of online sales growth, but the retailer’s chief executive says it needs to do even better.

The discount store chain said its U.S. e-commerce sales rose 41% in its fiscal third quarter, led by its strong grocery business, more than in recent quarters and better than Wall Street expected.

Walmart has invested billions in equipping stores to handle drive-by order pickup, the ability to ship orders from a store, and the option to deliver right into customers’ homes, among other services. Its network of thousands of stores has given it an edge in online grocery sales that is still far from matching.

But Walmart CEO Doug McMillon doesn’t think the chain’s online sales of non-grocery general merchandise are where they need to be and wants the overall digital business to move toward profitability.

Walmart gets 56% of sales from grocery, making it the biggest food seller in the country. That leads to frequent shopper trips to its website and its stores, something McMillon wants to leverage for the rest of the digital business. McMillon also wants Walmart’s digital marketplace to expand.

“We’re making progress on many fronts, but we need to do more and move faster, ” he said in a transcript of comments on the company’s fourth quarter results. “We need to translate this repetitive food and consumable volume into a stronger business that’s profitable over time.” Grocery is a narrow margin category compared to other product groups.

Wall Street firm Morgan Stanley has estimated that losses at the U.S. e-commerce business could hit $1.7 billion this year from $1.4 billion in 2018.

Still, Walmart’s overall U.S. business is thriving: Comparable sales, which include online revenue and business at established stores, rose 3.2% in the quarter ended Oct. 25, the 21st three-month period of growth in a row.

Its international division reported a 4.8% increase in sales, while its Sam’s Club warehouse business saw comparable sales inch up 0.6%, with lower tobacco sales muting results. Company-wide adjusted earnings per share increased to $1.16 per share, beating expectations of $1.09 per share.

The improvements in the Walmart U.S. business, which represents about 60% of company revenue, are attributable in large part to its CEO Greg Foran, who is leaving the company early next year and will be replaced by the head of Sam’s Club, John Furner. Foran oversaw vast improvements in store operations as well as appearance.

Furner told reporters on a media briefing that the U.S. business has “a lot of momentum.” What’s more, given the shortened holiday season because of the late Thanksgiving, Walmart will carry out a steady campaign of deals rather than make bets on a few big days.

Walmart shares were up 2% in morning trading on Thursday, building on a 30% increase so far this year.

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