Walmart to Double Online Grocery Locations

Comps remain strong, but online growth rate, margins slip in Q4

Walmart will double the number of U.S. store locations offering online grocery pickup this year, with an eye on attracting the lucrative and happy customer that has come with the service in its first 1,000-plus locations.

Shoppers who use Walmart’s online and stores to shop spend about twice as much with Walmart overall than shoppers who use stores only, CEO Doug McMillon said in a conference call discussing fourth-quarter financial results Tuesday. Online grocery has been especially popular with shoppers, producing what McMillon said was the “highest net promoter scores of anything we’ve launched in the recent past.”

The offering allows shoppers to create orders online and pick them up in stores for free. First launched in 2013, Walmart said it reached 1,000 U.S. stores in September. McMillon said that figure would nearly double this year.

The online grocery initiative came as Walmart announced strong fourth quarter comps in the U.S. and a forecast for continued sales growth in its new fiscal year, but also detailed a quarterly slowdown in the rate of online sales growth that had investors worried. Walmart's fourth quarter ended Jan. 31.

Overall U.S. e-commerce improved by 23% in the quarter, but that represented a sequential slowing of 50% growth posted in the third quarter. McMillon said the majority of the slowdown was expected as it lapped effects of the Jet.com acquisition in 2016. “A smaller portion of the slowdown was unexpected,” he said, “as we experienced some operational challenges that negatively impacted growth.”

McMillon did not elaborate further on the nature of those challenges.

Walmart finished the fiscal year with 40% online sales growth in the U.S., “so we feel better about the year than the quarter,” McMillon said.

Non-fuel comp sales at U.S. stores improved by 2.6% in the quarter on a 1.6% increase in store traffic and a 1% average basket size increase. Neighborhood Market stores comped by approximately 5.5% in the period. E-commerce initiatives, such as sales made online but fulfilled in stores, added about a 0.6% comp lift.

Walmart said it expects U.S. comps of at least 2% in the new fiscal year and e-commerce to grow by 40%. Impacts of tax changes, Sam’s Club stores closures, and new wage rates for employees would lead to slightly lower results than previously forecast.

Stock in Walmart was down by more 9% in afternoon trading Tuesday.


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