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Walmart hits speed bump on its way to $75 billion e-commerce goal

August 17, 2021, 3:45 PM UTC

$75 billion. That’s how big Walmart Inc. said on Tuesday it thinks its e-commerce business can get this year, a digital sales forecast it had never given so clearly before.

Walmart has long been cagey about the size of its digital business given how small it is compared with that of Amazon, which is 5.5 times greater in the U.S., according to eMarketer. But Walmart has made enormous strides in recent years on the e-commerce front, thanks to how it integrates stores and e-commerce, and it is now the second biggest online retailer in the United States.

Still, there are signs the Walmart juggernaut is slowing. In its most recent quarter, Walmart’s U.S. e-commerce sales rose a modest 6% compared with the year prior. What’s more, the online growth in the fiscal second quarter was barely higher than in-store sales growth. The single-digit growth figure comes after online sales more than doubled last year as the pandemic sent more customers online to place orders they would typically go pick up either by curbside or via a quick trip into the Walmart store.

And on that front, Walmart did well. Store visits to its U.S. locations rose 6%. Wall Street shrugged off the slowing e-commerce growth, and shares barely budged. In addition, Walmart, which gets more than half of its U.S. sales from groceries, won market share there despite bruising competition from the likes of Kroger, [hotlink]Albertsons,[/hotlink] and of course Amazon, an increase ascribed to Walmart’s efforts to beautify stores, compete harder on price, and improve supply chains. “Stores continued to validate Walmart’s ongoing investments as they were the key driver of the $1 billion increase in U.S. operating income on $5 billion in increased revenue, which is particularly impressive given the strength in its lower margin grocery-equivalent business that continues to grow share despite its massive scale,” Moody’s vice president Charlie O’Shea wrote in a research note.

Despite concerns about the Delta variant, Walmart raised its full-year sales and profit growth forecasts, saying it expects a strong back-to-school period to lift results. In the second quarter, revenue for Walmart Inc., which includes its international unit and Sam’s Club, rose 2.2% to $141 billion, above Wall Street forecasts. Its adjusted profit was also better than analysts had forecast.

Still, Walmart CEO Doug McMillon reiterated his wish to see vaccination rates rise, something that would help business enormously. The company has required home office workers to get vaccinated but not store workers nor customers. Walmart is offering a cash bonus to store workers who do get the jab. (Walmart’s home state of Arkansas has one of the lowest vaccination rates in the country.)

“It’s important that many people in the U.S. get vaccinated as soon as possible and vaccines be made widely available around the world,” he said.

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