By Tonya Garcia, MarketWatch
Walmart Inc.’s 41% e-commerce growth in the third-quarter was the best quarter of sales growth for its online channel this year, but much of the gain came from grocery, which GlobalData Retail argues shows a need to branch out into other categories.
GlobalData Retail also called out the 5.4% operating income decline to $4.72 billion from $4.99 billion last year.
“To change this, Walmart needs to improve its position in non-food, especially online,” wrote Neil Saunders, managing director of GlobalData Retail. “Driving a greater volume of higher-margin general merchandise via e-commerce is critical to bolstering operating numbers.”
Walmart executives recognize the need, with Marc Lore, Walmart’s U.S. e-commerce chief, saying on a Thursday premarket call with the media that home and fashion are two focus areas.
“We’ve evolved the strategy to focus more on incubation than acquisition,” Lore said.
GlobalData’s Saunders notes the shift in attention to these non-food items, and says the retail giant is attracting new customers. But it’s happening slowly.
“A lot of non-customers still view Walmart as a low-price player and not as a destination to get reasonable quality non-food items,” Saunders said. “Moreover, many lucrative online shopper segments remain wedded to Amazon, especially if they are members of its Prime program.”
In addition to these e-commerce hurdles, Saunders highlights the growing cost of competing with Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN +5.69% on faster shipping and, increasingly, grocery; the investments necessary to maintain Walmart’s low-price dominance in the face of competition from deep discounters; and the ongoing tariff issues.
“It remains a long-term winner, but there is likely short-term pain ahead,” Saunders said.
Other analysts were more bullish following the earnings announcement.