On the heels of its $3.3 billion acquisition of Jet.com, Walmart released its Q2 earnings report, showing a comparable store sales increase of 1.6% and a slight revenue improvement of 0.5%. In response to the better-than-anticipated earnings, the retail giant upgraded its full-year guidance, from a range of $4.00 to $4.30 per share to $4.15 to $4.35 per share.
Although the comparable store sales increase marks its biggest sales jump in four years, Walmart now has more to be excited about beyond its physical stores. E-Commerce sales at the brand grew by 11.8%, driven by a 13.0% jump in gross merchandise volume. The online sales jump was a much-needed shot in the arm for Walmart, especially since the company’s e-Commerce sales only grew 7% in Q1, with digital sales growth having fallen for five straight quarters prior.
Such positive momentum is all Walmart could have asked for as it continues to play catch-up with Amazon. While Amazon still dominates from a sales perspective, Walmart’s acquisition of Jet.com not only brings the e-Commerce brand under its umbrella but gives it the opportunity to leverage the consumer-facing transparent volume pricing negotiation technology that comes with it.
With lower prices and dynamic pricing already having been Jet.com’s key points of differentiation, Walmart now is tasked with spreading these offering to its enormous customer base.
Even prior to the Jet.com acquisition, Walmart had taken plenty of strides to beef up its e-Commerce and omnichannel offerings. The retailer is partnering with on-demand delivery services Uber, Lyft and Deliv to pilot a new online grocery delivery service, and Walmart recently made its ShippingPass two-day fulfillment service open to all U.S. consumers. A Shipping Pass membership costs $49 per year, nearly half the $99 total of chief competitor Amazon Prime. The introduction of ShippingPass also coincided with an increase in products made available online, with Walmart.com displaying as many as 15 million items, almost double the eight million listed in May, according to the Wall Street Journal.
Target’s E-Commerce Slowdown Raises Concerns
The good news for Walmart actually highlights a stark contrast with one of its key competitors: Target. While Target already has plenty to worry about in its brick-and-mortar stores, showing its first comparable sales loss in two years and experiencing a 2.2% decrease in store transactions, the retailer now has to keep a watchful eye on its slumping e-Commerce sales as well.
The retailer’s 16% growth rate in digital sales dipped from its 23% growth in Q1, and is only half the 34% growth rate of Q4 2015. Although e-Commerce sales only represent 3.3% of Target’s sales as a whole, stagnation in the digital channel is certainly not the direction the brand wants to go in if it already has an existing traffic problem within its stores.