• 139 days Could Crypto Overtake Traditional Investment?
  • 144 days Americans Still Quitting Jobs At Record Pace
  • 146 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 149 days Is The Dollar Too Strong?
  • 149 days Big Tech Disappoints Investors on Earnings Calls
  • 150 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 152 days China Is Quietly Trying To Distance Itself From Russia
  • 152 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 156 days Crypto Investors Won Big In 2021
  • 156 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 157 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 159 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 160 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 163 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 164 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 164 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 166 days Are NFTs About To Take Over Gaming?
  • 167 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 170 days What’s Causing Inflation In The United States?
  • 171 days Intel Joins Russian Exodus as Chip Shortage Digs In
  1. Home
  2. News
  3. Breaking News

Walmart’s E-Commerce Rebound Fails To Boost Stock Price

Walmart

Walmart’s been making an aggressive e-commerce push, including a major deal for a nice chunk of the massive Indian market recently, and quarterly earnings show sales up by an impressive 33 percent, but share prices are down today.

(Click to enlarge)

As of 3:12pm EST, Walmart shares had lost 2.45 percent on the day, and since January, the stock is down over 20 percent.

Here’s why:

Walmart’s Q1 earnings have come in strong as e-commerce sales rebound, but profit margins still bite, continuing their quarterly decline for the fourth time in a row as price cuts and rising freight costs weigh in.

Walmart’s gross margin lost 23 basis parts in Q1 2018, and operating income in the U.S. division was down 3.1 percent from the year before. Related: Senate Votes To Protect Net Neutrality, But What’s Next?

Even though sales grew 33 percent and Walmart is expected to see a 40-percent increase in U.S. e-commerce sales for 2018, it’s not enough to ease investor concerns.

E-commerce is looking great, and Walmart said a website redesign has also resulted in a 10-20-percent increase in online grocery traffic, but will it be enough?

Edward Jones analyst Brian Yarbrough told Reuters that Walmart’s margin performance remains a potential concern when it comes to whether the company can make money “given the large investments in e-commerce”.

But this is a longer-term play, and while it might be expensive, Walmart is making bold, aggressive moves to expand and improve and continue to challenge e-commerce retail giant Amazon—even if it means putting a lot of pressure on profit margins in the short-to-medium term.

And with this in mind, Walmart’s $16-billion deal for India’s Flipkart—the country’s online retailer last week is a blockbuster.

Investors may get impatient waiting for profit margins to increase, but those who stick with Walmart are likely to benefit from its aggressive plans. After all, in India there are 1.3 billion potential customers up for grabs and now Walmart has a 77-percent stake in Flipkart, which is valued at $20 billion.

And this is a vicious battle because Amazon may also be seeking a stake in Flipkart to head Walmart off.

And now, Walmart is hoping to get another boost by targeting the most elusive group for retail: Affluent Millennials—through Jet.com, which is eyeing premium brands and products (think Apple). Jet.com, whose parent is Walmart, is planning to curate these products in a new push with Millennials in mind, and the website is very different from Walmart itself, “targeting very different demographics and audiences”, according to Walmart’s e-commerce chief executive Marc Lore. 

Also on Wednesday, Walmart launched the Lord & Tayler flagship to bring 125 new premium brands to the site.

Analysts from Cowen noted that the “like Walmart’s digital intensity and innovation as well as the company’s innovative leverage of physical assets to drive multi-channel shopping …”

By Fred Dunklety for Safehaven.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment