Consumer

Sarah Halzack is a Bloomberg Gadfly columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.

What a difference a couple of years can make.

Ahead of its annual investor meeting on Tuesday, Wal-Mart Stores Inc. laid out a forecast for the year ahead that includes strong year-over-year revenue growth of 3 percent and robust 40 percent growth in its U.S. e-commerce business.

The relatively upbeat forecast, and investors’ favorable reaction to it, had me thinking back to Walmart’s investor presentation in 2015 -- a day with a much different tenor.

Back then, the world’s largest retailer offered a disappointing profit outlook as it pledged to plunge $2 billion into shoring up its then-flailing e-commerce business. In response, the company’s stock tumbled more than 10 percent that day, its biggest one-day decline since 1988.

A Low Point
Wal-Mart's 2015 investor presentation made for a rough day for a stock that had already been battered that year
Source: Bloomberg

The message was clear:  Investors were losing confidence in Walmart's ability to thrive in a digital world.

Fast forward to Tuesday, and the market's opinion of Walmart is quite different. And that’s not just because of this latest rosy forecast, but because of the cumulative steps the company has taken recently that underpin its chances of meeting those expectations.  

Consider the investments Walmart was talking up during that 2015 presentation: They were constructive enough, but largely sounded like things Walmart should’ve done five or 10 years earlier.

Executives talked about adding more e-commerce fulfillment centers powered by automation. Great, but Amazon.com Inc. already had an expansive network of those. They talked about expanding Walmart’s online offerings, but Amazon already sold hundreds of millions of different items. At the time, Walmart was testing its own version of a Prime-like subscription – a full 10 years after Amazon debuted its game-changing program.

It all amounted to playing catch-up. No wonder investors were not impressed.

But if you look at some of the e-commerce ideas Walmart has rolled out more recently, they are actually – gasp – innovative. 

Take, for example, its decision earlier this year to offer discounts on certain online purchases if you pick up the order at the store instead of have it delivered to your doorstep. That’s a valuable experiment in trying to incentivize a more-profitable form of e-commerce.

Walmart just announced a new feature in its mobile app that significantly speeds up the process of returning an online order at a store, attacking a key pain point of online shopping.

And last month, it launched a pilot program in which a delivery worker puts your online grocery order directly in your refrigerator while you’re not home – if they have a one-time passcode to a smart lock on your front door. Online grocery is a must-win category for Walmart, so it's logical to test different ways to get perishables into people’s homes without them sitting for hours on doorsteps.

It's entirely possible these more-imaginative endeavors don’t move the needle much for Walmart in terms of sales or profitability. (I don’t know about you, but I’d be creeped out about letting a stranger come into my home and unpack groceries while I’m not there.)

But these initiatives matter because they symbolize that a different kind of thinking has taken hold at Walmart. Particularly since CEO Doug McMillon brought on Marc Lore to lead the company’s digital business, the retailer is taking risks. Instead of just trying to emulate what’s already working in the wider e-commerce world, it seems to be trying to think of ways it can break away from the pack.  

It’s not going to be easy for Walmart to meet the expectations laid out in its guidance. Now that Jet.com has been part of its portfolio for more than a year, it is starting to lap the gains in e-commerce growth it made simply by adding that property to its stable.

Picking up the Pace
Wal-Mart's e-commerce sales growth has dramatically improved in the last couple of quarters
Source: Company filings

But Walmart is in a much better position now than it was in the dark days of 2015.

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

To contact the author of this story:
Sarah Halzack in Washington at shalzack@bloomberg.net

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