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Walmart’s Online Sales Stumbled, Profits Plunged in Q4

After a huge leap forward in the third quarter, Walmart’s e-commerce sales growth hit a major speed bump at the end of the year.

In a Nutshell: In response to slowing online sales growth, Walmart outlined plans to pick up the pace during the company’s fourth quarter earnings call. The big-box retailer, which has been positioning itself to compete against Amazon, reported online growth of 23 percent for the quarter, which was down from 50 percent in the third. That acceleration was largely due to the acquisition and the brain trust that came with it. “The majority of this slowdown was expected as we fully lapped the Jet acquisition, as well as created a healthier long-term foundation for holiday,” said president and CEO Doug McMillon. “A smaller portion of the slowdown was unexpected as we experienced some operational challenges that negatively impacted growth.”

The chief executive attributed the unexpected performance to the company’s failure to juggle the influx of seasonal goods with basic in-stock items.

The stumble sent share prices down by 10.2%.

In addition to figuring out to handle situations like that, Walmart plans to double its number of online grocery locations, given that those shoppers ultimately spend more. The company will also implement’s smart cart function to help boost basket size. Further, McMillon said a site redesign is on the way. To further goose Walmart sales, marketing for Jet will decrease in order to focus on, since the company found that it’s cheaper to acquire new customers for Walmart than Jet.

McMillon said the retailer is positioning to take advantage of the opportunities it sees to boost its already “big apparel business.” In addition to the new private-label collections, which were announced last week, he said Walmart could add to its digital native brand acquisitions beyond Bonobos and ModCloth.

“We’re focused on improving quality; still managing good, better and best; protecting opening price points, which we do such a great job of; reducing our SKU counts in apparel to improve our presentation,” McMillon said. “Apparel is a pretty big focus at the moment.”

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Sales: Net sales for Walmart U.S. increased by 3.4% to $86.6 million. Comp sales increased of 2.6% for the fourth quarter of fiscal year 2018, with a 2.1% increase for the year—the highest growth rate since fiscal 2009.

The U.S. division reported online growth of 23 percent for the quarter and 44 percent for the year.

Net sales at Sam’s Club increased by 3.3% to $15.5 billion for the quarter. Comp sales at Sam’s Club were up 2.4% during the same period.

Walmart International achieved net sales of $33.1 billion, a 6.7% increase for the quarter, with nine of the 11 markets posting positive comps.

Earnings: The company reported net income of $2.2 billion or 73 cents per diluted share, a 42.1% drop from the $3.8 billion, or $1.22 per diluted share, during the prior-year period.

Full-year net income totaled $9.9 billion, or $3.28 per diluted share, a 27.7% drop from the $13.6 billion, or $4.38 per diluted share, reported in FY 2017.

CEO’s Take: “We’re confident in our strategy to transform the company, and we continue to be guided by four key objectives: make every day easier for busy families, change how we work, deliver results and operate with discipline and be the most trusted retailer,” McMillon said. “We’re accelerating innovation in the business to make shopping faster and easier for our customers. Creativity, decisiveness and speed are priorities.”