Consumer

Shelly Banjo is a Bloomberg Gadfly columnist covering retail and consumer goods. She previously was a reporter at Quartz and the Wall Street Journal.

What a difference a year makes for Wal-Mart.

The world's biggest retailer, at its annual meeting with analysts on Thursday, reiterated earlier forecasts that it didn't expect to grow earnings for the next two years. In a dramatic break with its past approach, it plans to slow store openings and put the money it saves into its e-commerce business.  

Resetting Expectations
Walmart's shares fell as much as 4% Thursday after its earnings forecasts came in lower than expected
Source: Bloomberg
Intraday times are displayed in ET.

Some investors balked at the outlook, sending shares down about 4 percent Thursday morning.

But the reaction wasn't nearly as bad as what happened a year earlier, when Walmart lost $20 billion in market value in less than 20 minutes -- the equivalent of the market value of Macy's and Nordstrom combined.

Wal-Mart Sees More Spending on E-Commerce, Remodelling

Walmart's stock fell 10 percent that day last year, as investors tried to digest planned wage increases costing roughly $3 billion over a number of years and a warning that earnings won't grow again until fiscal 2019. 

A year later, Walmart's stock price and analyst forecasts have rebounded. Sales growth at existing U.S. stores is steady, buoying confidence in the company. By resetting expectations, Walmart has bought itself some time to realign its business with changing customer shopping behavior.

Staying in the Lines
Walmart has reset expectations for its business, boosting investor confidence and analysts' expectations
Source: Bloomberg

The only problem is, that leeway won't last forever. Walmart needs to move faster. 

It's great that Walmart plans to slow U.S. store openings -- it's been a long time coming. But the real slowdown doesn't happen until fiscal 2018, when Walmart plans to open just 35 superstores (in its heyday, Walmart opened hundreds of these massive outposts per year).

This year, meanwhile, Walmart opened, expanded or relocated 230 stores, and it expects to open 130 new locations next year. 

Hard Stop
Walmart is slowing the pace of new store openings so it can shift that money to digital investments
Source: Company filings

And despite Walmart's lofty promises last year to grow online sales, they still lag the overall e-commerce market. In the first and second quarters of this fiscal year, Walmart's online sales rose 8 percent and 11.8 percent, respectively, from a year earlier. In contrast, total year-over-year U.S. online sales grew 15.5 percent and 15.8 percent in the same quarters. Amazon's quarterly retail sales growth was upwards of 25 percent in the past two quarters.

Click and Collect
Could Walmart be jump-starting its online sales growth?
Source: Bloomberg Intelligence

This year, Walmart aims for an online sales growth rate of 20 to 30 percent. Its $3.3 billion acquisition of Jet.com founder Marc Lore and the new blood infused into its e-commerce operations should certainly help. So will its investment in Chinese e-commerce company JD.com, a possible $1 billion investment in Indian e-commerce company Flipkart, and focus on online grocery

But Walmart is up against tough competition: Amazon, Alibaba and other online giants show no signs of slowing down. For Walmart to remain the world's largest retailer by revenue, it's going to have to pick up the pace.

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 sbanjo@bloomberg.net

To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net