Walmart's Bid to Catch Amazon Will Lose $1 Billion This Year
Danny Vena, The Motley Fool
via Yahoo Finance - July 8, 2019
E-commerce leader Amazon.com (NASDAQ: AMZN) single-handedly changed the retail landscape with the massive success of its online shopping platform, leaving many traditional retailers struggling to catch up. One of the most high-profile examples is that of Walmart (NYSE: WMT). The world's largest retailer was in danger of being left behind, until it made the biggest bet in its history. Walmart spent $3.3 billion to acquire thriving e-commerce start-up Jet.com and its visionary founder and CEO Marc Lore.
That strategy appeared to pay off. In each of the past two years, Walmart reported e-commerce sales growth that significantly outpaced the rest of its retail operations. Online sales grew by 40% last year, on top of 44% growth achieved in the prior year. This shows that the company is in a much better position to compete in the digital economy.
Unfortunately, all that success is not making its way to the bottom line.
Losses are mounting
Walmart expects its U.S. e-commerce operations to lose more than $1 billion this year on revenue of between $21 billion and $22 billion, according to a report by Vox's Recode. To make matters worse, while Walmart has made a dent in Amazon's lead, it's been a very small one. Amazon was responsible for about 38% of online retail in the U.S. last year, up from 32% just two years ago, according to eMarketer. At the same time, Walmart's digital sales grew to 4.7%, up from 2.6% -- still far behind Amazon's dominant lead.
It's also a far cry from Walmart's industry-leading retail, which generated sales of $515 billion and profit of nearly $7 billion last year.
Investors shouldn't be shocked ...
The big picture ...
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