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Published: Thu, February 22, 2018
Economy | By Melissa Porter

Walmart's Revenue Rises, but Profit Falls Amid E-Commerce Push

Walmart's Revenue Rises, but Profit Falls Amid E-Commerce Push

That's more money than the GDP of Belgium (and a lot of other countries, too). The company has been struggling in the market ever since the figures broke out to the public; looking at its performance, the retailer managed to drop a total of 3% in the pre-market trading. It was the largest single-day drop since October 2015.

The shift toward e-commerce is proving costly. In the past few years, the American company invested a lot to expand its online division, including thanks to online retailer Jet.com acquisition. "Our stores are executing better, we're innovating more, and customers are responding with higher sales and traffic", he said in an earnings call with investors yesterday. Walmart paid $3.3bn to buy Jet.com in 2016.

Meanwhile, Amazon is making its own advancements in grocery and apparel, treading on Walmart's turf. "It is possible we might choose our e-commerce segment might lose a little more this year than in 2017, but generally speaking, we believe the level of losses would be the same", said Walmart's Chief Executive Officer, Dough McMillon.

Some of that slowdown in growth was because the company ran out of some items at its online fulfillment centers, said CEO Doug McMillon.

In what had been a rapid-growing online business, the retail giant reports having suffered a sharp slowdown, as logistical issues compounded competitive pressure. The company has expanded its assortment, introduced initiatives such as two-day free shipping on items, acquired online retailers like Bonobos and ModCloth, and poured resources into online grocery pickup and other services meant to link the company's online offerings with its network of stores. In recent years, the company has also steadily pushed into the brick-and-mortar retail space, notably in the USA where it acquired Whole Foods Market in 2015 for $13.4 billion.

The online retailer's shares were up more than 2 per cent.

For the current year, the company expects US comparable Walmart store sales to rise 2% and net sales growth of 1.5% to 2%. The company has been riding on its robust past record, which derives strength from constant e-commerce initiatives, like buyouts, alliances, surging grocery business and improved delivery systems. That was the 14 straight quarter of growth.

"They're doing well", Yarbrough said.

But investors sent shares down $10.67 a share to $94.11. It's going to continue to be competitive. The business's revenue for the quarter was up 4.2% compared to the same quarter last year. equities research analysts predict that Wal-Mart Stores Inc will post 4.44 earnings per share for the current fiscal year.

Walmart forecast earnings of $4.75 to $5 per share for the current fiscal year on a 2 percent increase in USA same-store sales.

"We have good momentum in the business, with solid sales growth across Walmart U.S., Sam's Club and worldwide", said McMillon. Online sales were up 23% from a year ago, but that was much slower than the previous nine months - a sign that Walmart is finding it more hard than expected to compete with Amazon.

Walmart Stores Inc. the worlds biggest retailer is in negotiations with Flipkart, leading e-commerce marketplace to buy more than 30 percent stake in the company in order to open another global front in its battle against Amazon.

For fiscal year 2019, Walmart forecasts an EPS of $4.75 to $5.00 on an estimated same store sales growth of 2 percent in U.S. Walmart locations.

Walmart also announced the closing of 10% of Sam's Clubs in the US earlier in 2018 and has slowed down its openings of new Walmart locations to focus on the growth of e-commerce.

The company estimated its tax rate would be between 24 percent to 26 percent as a result of the new federal tax structure.

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