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Walmart reportedearnings for its fiscal Q1 2020 (ended April 26, 2019), announcing that its US comparable sales growth was up 3.4% year-over-year (YoY), its best performance in nine years. This result was partially driven by its US e-commerce business, which rose 37% YoY, surpassing the company’s 35% forecast for the segment in this fiscal year, according to Reuters.
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What it means: While its Q1 performance outpaced its expectations for the year, Walmart’s e-commerce growth still decelerated and will need to bounce back to challenge Amazon.
- Its 37% YoY growth is down from the 43% it posted each of the last two quarters.This follows a year-long recovery from its disappointing 23% YoY growth in its fiscal Q4 2018, and while Q1’s growth is no reason to panic, it’s important that the metric not drop further, lest Walmart will have to make another comeback plan. And while hovering in the growth range it’s in is solid, if Walmart wants to catch up to Amazon it’ll likely need to grow even faster, so it certainly can’t afford for its e-commerce business to develop slower.
- Walmart’s been putting a number of initiatives in place that can boost its e-commerce performance going forward. These include its NextDay delivery offering that it’s beginning to roll out, the addition of new private labels like furniture brand MoDRN, and personalized features like its new online baby registry and subscriptionapparel service. Adding offerings and features like these can make Walmart more attractive to consumers by meeting or exceeding their expectations for key factors like delivery speed, price, selection, and personalization.
The bigger picture: The trade war between the US and China threatens Walmart’s growth as it can weaken its ability to offer its trademark low prices.
Increased tariffs will raise prices for consumers, and while Walmart intends to lessen their effect on prices, that impact can hurt Walmart’s appeal.Walmart still wants to be the low-price leader, but CFO Brett Biggs acknowledged that higher tariffs will lead to higher prices for consumers on the company’s earnings call, according to CNBC. The retailer will try to source products from countries other than China so its prices will be impacted less, Biggs told Reuters.
All retailers will be hurt by increased tariffs but, because of Walmart’s position as a low-price retailer, it may be affected more harshly as previously loyal customers may be disappointed with price increases, and prospective customers may not find the prices they were expecting and look elsewhere, damaging its e-commerce and overall performance.
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