Walmart Disappoints But Stays Course on Price Ads and Ecommerce

Giant Gains Share in Groceries, Ecommerce Even As Comps Turn Negative

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Walmart reported first-quarter sales and earnings that missed forecasts, but it's forging ahead with more local price-comparison ads and e-commerce investments amid signs its executives see that both are working.

0604 p19 walmart
0604 p19 walmart

Earnings of $1.14 per share for the quarter ended April 30 fell a penny below analyst forecasts. Comparable-store sales for the nameplate U.S. stores fell 1.4%, compared to a forecast of "about flat," breaking a streak of six positive quarters.

But executives pointed to things they said are producing positive results, including aggressive pricing, particularly on groceries, backed by local market-basket price-comparison ads on TV and radio that U.S. CEO Bill Simon said will now expand to 70% of Walmart's markets, up from the current 60%.

Same-store sales of groceries and other consumables rose low single digits, Mr. Simon said on a pre-recorded call, and the retailer gained 0.2 points of market share in those businesses last quarter according to Nielsen, he said.

The company is also seeing signs that big investments in e-commerce and related digital and social-media technology are paying off. Its e-commerce sales rose more than 30% last quarter, ahead of rival Amazon's 22% growth, which disappointed analysts.

Walmart has a long way to catch up, with projected e-commerce sales of $9 billion this year vs. Amazon's $61 billion last year. But it continues to invest heavily in its San Bruno, Calif.-based @WalmartLabs unit for digital and e-commerce innovation, launched originally with the $300 million acquisition of Kosmix two years ago.

Earlier this week, Walmart announced two more acquisitions to bolster @WalMartLabs – cloud infrastructure player OneOps and Tasty Labs, a developer of social-media-powered e-commerce applications.

Principals of the latter will stay on either as @WalmartLabs employees or consultants, including Mozilla veteran Nick Nguyen, creator Joshua Schachter, and Paul Rademacher, creator of HousingMaps, a mashup of Craigslist rental ads and Google Maps.

Chief Financial Officer Charles Holley said on today's call that e-commerce will continue to get "strategic investment" because of the opportunity demonstrated in part by last quarter's sales growth.

One more bright spot: Double-digit growth led by its Straight Talk prepaid plans pushed Walmart to leadership in U.S. handset sales last month, Mr. Simon said, citing NPD.

Some other key Walmart competitors also disappointed Wall Street on the top line in recent months or the past quarter – though still beating Walmart. Costco's same-store sales have risen 4%-6% in recent months, falling short of forecasts two of the past three months. Target, which reports quarterly earnings next week, last month pre-announced comp-store sales would be flat. Overall, U.S. retail sales were about flat, ranging from down 0.5% to up 0.4%, for the three months in Walmart's first quarter.

On their call, Walmart executives blamed late tax refund checks, the 2% payroll tax hike, unseasonably cold weather, lower-than-expected food-price inflation and comparisons to a year-ago period that included a roughly 1% bump from an extra day due to leap year. The forecast is better for this quarter – flat to up 2% -- with sales growth so far in May.

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