With Sales Up, Walmart's E-Muscles Are Showing

A day after Target Corp. reported refreshingly strong quarterly sales, Wal-Mart Corp. did the same, citing its continuing success in integrating e-commerce with its brick-and-mortar sales.

It says net sales at soared 60%. In the U.S., foot traffic at its stores increased 1.3% compared to the second quarter of last year, and comparable-store sales climbed 1.8%. Total sales rang in with a 2.9% increase to $123.4 billion on a constant-currency basis, while sales in the U.S. advanced 3.3% to $78.7 billion. 

Operating income declined 3.2% to $6.07 billion, as the company continues to invest in e-commerce initiatives. Sales fell in its international division. Results came in ahead of analyst expectations.

While the company has stepped up its acquisition of e-commerce sites, including Bonobos, Moosejaw and ModCloth, it says the majority of the gains in e-commerce are organic, as customers are buying a wider assortment of items: It now offers 67 million different products on line.



In a conference call for investors, CEO Doug McMillon cites its ongoing back-to-school offerings as an example of its higher levels of cross-channel integration. The microsite allows families to enter their zip codes, select their child’s school and classroom, “quickly adding all the items from the school list to their basket. Then, they can choose whether to pick up the items at their local store or ship them to their home. It’s a huge time-saver for busy families,” he says. “Our strategy is to make every day easier for busy families.”

In recent months, it’s also begun testing using store associates to make deliveries, and he says that by the end of this year, it expects to have 100 of its new automated pick-up towers in the U.S.

Some industry experts see plenty of risks ahead for Walmart, however, especially as Aldi and Lidl present new competitive threats on the brick-and-mortar side of its business, and Amazon, with its recent acquisition of Whole Foods Markets, seems certain to step up its e-grocery game.

“The competitive environment is intensifying,” writes Paul Trussell, an analyst who follows the retailer for Deutsche Bank, in a report written earlier this month. “While we think Aldi and Lidl are more likely to nip at regional grocers and see some customer segmentation given emphasis on every day low prices vs. Whole Food’s robust reputation in organic/natural, we acknowledge risk to Walmart simply as it has the most share to lose.”

And while he sees the Bentonville, Ark.-based company as a “legitimate contender versus Amazon in the long term … it’s by no means a shoo-in.”

The company says it expects comparable-store results in the U.S. to rise between 1.5% and 2% in the next quarter.

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