Anyone who has stood in line at Walmart during a Black Friday sale knows the wait can be long and taxing. Watching to see if and when Wal-Mart Stores Inc. turns around its e-commerce business is no different.
Positive signs emerged Thursday, when the world's largest retailer said online sales rose 20.6 percent from a year ago, helped in part by six weeks of sales from Jet.com, the web business Walmart acquired during the quarter for $3.3 billion.
What the online sales growth would have been without the help from Jet -- not to mention adjusting for the Chinese web business it sold to JD.com -- is murky.
But the results marked the second quarter of accelerating online sales growth, after more than two years of slowing growth. Walmart also said it expanded its grocery pickup service, where customers order food online and pick it up in stores, to 600 locations from 400 in the previous quarter.
Still, with an operation as big as Walmart, it's basically impossible to be firing on all cylinders. Recent history shows Walmart rarely grows sales and profits meaningfully at the same time.
In the third quarter, sales at established U.S. stores grew by 1.2 percent from the year before, marking two years of positive sales growth, though the metric missed analyst estimates and marked a deceleration from the previous quarter.
Meanwhile, operating income dropped 10.4 percent in the quarter as labor and e-commerce investments continue biting into profits.
Walmart's slight sales miss was unexpected, sending shares down around 4 percent Thursday. But the profit weakness was no surprise: Walmart has warned investors it doesn't plan to grow profits until 2019. Taking an Amazon-like approach to managing expectations, it hopes to get a pass on profits so it can boost sales and attract more customers to shop on its digital channels.
Not everyone is buying the explanation. Billionaire investor Warren Buffett, for one, has drastically reduced his shares in the company over the past year.
But the great re-framing has bought Walmart a few more years of patience from Wall Street as it positions itself to better compete with Amazon. Twenty-one of the 34 analysts who cover Walmart and are tracked by Bloomberg rate the stock a "hold." (It has three "sell" ratings and 10 "buy" ratings.)
But to make all this profit-bleeding worth it, Walmart has to show some real progress in e-commerce sales. Positive third quarter-results helped, but they were a bit too muddled with acquisitions and disposals to be a good judge of improvement yet.
All eyes now turn to the upcoming holiday season, where the name of the game is using online channels to grab market share and customer data to hook shoppers for the rest of the year. Unless investors see real signs of online sales growth during the fourth quarter, they might just give up waiting in line.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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