• Retail Dive

Walmart shoots for 40% e-commerce growth

Dive Brief:

  • In a day of presentations to analysts, Walmart on Tuesday kicked things off by reiterating financial guidance for the year of $4.18 to $4.28 earnings per share, and its plans to allocate an additional $20 billion to its share repurchase program, according to a company statement released prior to the event.

  • Store remodels and new digital experiences remain the priority for fiscal years 2018 and 2019, according to the company. Plans are to allocate roughly $11 billion to capital expenditures, including supply chain initiatives.

  • The company expects to add just 280 new, expanded or relocated stores globally for each of the fiscal years 2018 and 2019. Meanwhile, the big-box retailer expects U.S. e-commerce sales to grow by 40%.

Dive Insight:

Walmart is laser-focused on growing e-commerce and analysts expect to hear more details about the digital business. A goal of 40% growth is ambitious, and Wall Street wants to know more about how the retailer will get there.

Questions from analysts will likely focus on the status of Jet.com's integration as well as the new digital acquisitions and improvements to the supply chain. Grocery will receive extra scrutiny as competition with Amazon heats up in the category.

"We have good momentum in the business, we’re executing our strategy and moving with speed to win with the customer, who is more connected than ever and embracing tools that will save them both time and money," Walmart CEO Doug McMillon said in a statement. "We’re combining the accessibility of our stores with e-commerce to provide new and exciting ways for customers to shop. I’m proud of the team we have in place, the work we have underway and how we are positioned for success in the future."

Walmart's ambitious e-commerce growth goal suggests it will continue to "turn up the heat online," Charlie O'Shea, vice president and senior analyst at Moody's Investor Service, said in a note emailed to Retail Dive. "The redeployment of significant capital expenditure dollars from new stores in the U.S. to online improvements and store remodels, especially the 1,000 store increase in in-store grocery pick-up locations, will help Walmart maintain its market-leading position in the U.S. grocery segment," he added.

Walmart plans to add 1,000 grocery pickup locations in the U.S., but fewer than 25 new brick-and-mortar stores in the supercenter and Neighborhood Market formats combined.

Still, Walmart has a lot of obstacles in its way, O'Shea said. "We still believe Amazon's lead in online retail is insurmountable, however Walmart continues to widen the gap between itself and all other brick-and mortar retailers by leveraging its unmatched physical resources, including stores and supply chain, and in the process is provide consumer with a compelling online alternative to Amazon," he said.

But Walmart is much more than grocery, and analysts are expecting to learn about plans for Sam's Club, where margins have been down for the past four years, noted Gordon Haskett analyst Chuck Grom in an email to Retail Dive in advance of the meeting. Even more worrisome is the anticipated price competition as retailers head into the peak holiday season.

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