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Walmart’s e-commerce growth slid in Q4 (WMT)
BI Intelligence
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Walmart reported its earnings for Q4 fiscal year 2018 (ended January 31, 2018), which showed that the retailer’s US e-commerce sales grew 23% year-over-year (YoY), a significant deceleration from the previous three quarters, which saw 63%, 60%, and 50% YoY growth in chronological order.
Despite this, Walmart posted a 44% YoY increase in e-commerce sales for the full year of 2017, totaling approximately $11.5 billion, but the continuing deceleration of its online business is worrisome. Meanwhile, Walmart brought in $136.3 billion in revenue in Q4, which represents a 4.1% YoY jump, and its US same-store sales and traffic increased 2.6% and 1.6% YoY, respectively.
CEO Doug McMillon pointed to stocking issues as one of the causes of Walmart’s e-commerce deceleration. While the CEO said that most of the deceleration was planned and expected, he did admit that Walmart failed to stock enough nonseasonal items to meet demand during the holiday season, and instead focused on holiday items such as toys and televisions. Such an issue makes sense for a company that has only recently made an effort to become an e-commerce powerhouse, and the high demand is a good sign, but it will need to learn from its mistakes quickly, because it can't afford to experience similar stocking issues and slow growth going forward.
Because of its slowing e-commerce growth, it's possible that much of Walmart’s previous growth was driven by its acquisitions, bringing its ability to create organic growth into question. McMillon stated that fully lapping its acquisition of Jet.com contributed to the sudden deceleration, and Walmart has acquired a number of other e-commerce companies since then. It's possible that all of these new companies buoyed Walmart’s e-commerce sales growth over the last few quarters, and that this 23% is closer to Walmart’s organic e-commerce growth. However, given that Walmart’s guidance suggests that the upcoming year will see approximately 40% YoY growth in e-commerce, the retailer clearly doesn't believe it needs inorganic growth from acquisitions to drive e-commerce.
Walmart will need to hit its 40% YoY e-commerce growth guidance for the next year if it wants to seriously compete with Amazon. Amazon keeps chugging along, posting between 16% and 22% YoY growth in its online net sales over the last six quarters. And it's doing so with a much larger level of revenue: Amazon tripled Walmart’s annual e-commerce sales in its Q4 2017 alone. Because Walmart is likely significantly behind Amazon in e-commerce, it cannot simply keep pace; Walmart must reach at least its 40% projection if it wants to make significant gains on Amazon.
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