Shelly Banjo is a Bloomberg Gadfly columnist covering industrial companies and conglomerates. She previously was a reporter at Quartz and the Wall Street Journal.

Retailers have had a dreary run lately, as shoppers shift spending away from clothing and electronics toward restaurants, travel and experiences. So when Walmart reported quarterly financial results Thursday that were not horrible, investors breathed a sigh of relief. 

Walmart's shares rise the most since October 2008
Source: Bloomberg
Intraday times are displayed in ET.

Shares in the world's largest retailer jumped by as much as much as 9 percent in early trading, as investors took the company's 1 percent rise in U.S. sales at established stores from a year earlier as a sign that American shoppers are doing OK. It was the company's biggest one-day stock gain since October 2008. 

Walmart's 1%
Walmart has managed to squeeze out comparable sales growth of roughly 1 percent for six straight quarters
Source: Bloomberg

But there's one number that should give investors pause: Walmart's online sales grew by just 7 percent in the quarter from the year before, down from 17 percent in the first quarter of 2015 and 27 percent in the first quarter of 2014. 

Wrong Direction
Despite Walmart sinking billions into building e-commerce operations, online sales growth is slowing
Source: Bloomberg Intelligence

Online sales at Walmart are now growing at a much slower pace than the overall U.S. e-commerce market, which increased by 15 percent in the first quarter from a year ago, according to the U.S. Census Bureau. (Not to mention Amazon's 25 percent sales growth in its latest quarter, excluding its web services business.) Online sales now make up nearly 8 percent of total U.S. retail sales. They make up around 3 percent of Walmart's sales. 

Clicking Along
E-Commerce sales now make up nearly 8% of total U.S. retail sales
Source: Bloomberg, U.S. Census Bureau

The declining online growth trend at Walmart is even more worrisome because e-commerce has been a major area of investment for the company, which has sunk billions of dollars into building new mobile and web capabilities, as well as new warehouses to store online goods.

But the investment isn't paying off in terms of sales growth, nor in terms of the company's return on investment capital. The financial metric, which measures the efficiency of a company's capital allocation, has been falling at the big-box retailer,which built its business on only putting money into areas with proven financial returns.

The Buck Stops Here
Walmart is getting less bang for its buck with each dollar in invested capital
Source: Bloomberg

Meanwhile, Walmart continues to plunge billions of dollars into increasing worker wages and building new stores. These efforts seem to be boosting sales but denting profitability. Walmart's operating income has declined for ten straight quarters and its adjusted earnings per share has declined for five consecutive quarters. Walmart's sales per retail square foot has fallen to $422 in 2016, from $445 in 2013. 

Walmart CEO Doug McMillon on Thursday's earnings call acknowledged the weakness in online sales, telling analysts that "growth here is too slow." He said the company is working on a number of fixes, including letting more third-party sellers hawk goods on its website and expanding its grocery pickup service. But it will take some time to build out all of its e-commerce capabilities. 

Meanwhile, Walmart's online nemesis, Amazon, keeps pulling ahead. CEO Jeff Bezos told investors this week the company's goal is to make it "irresponsible" for people to not belong to its Prime membership program, as it expands into once-safe categories for Walmart such as apparel and groceries.  

Retail Divide
Shares in Walmart are up 3% year to date, but are still down 20% over the past three years
Source: Bloomberg

So while today looks good for Walmart, failing to figure out where shoppers are going tomorrow will hurt the company in the long run. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Shelly Banjo in New York at

To contact the editor responsible for this story:
Mark Gongloff at