Walmart shares tumble, online struggles spook investors

Walmart Inc, the world’s biggest retailer, on Tuesday posted a sharp drop in profit and online sales growth during the critical holiday period and forecast annual profit at the lower end of expectations.

Its shares fell 9.4 percent as investors worried that Walmart would not be able to keep pace with Amazon.com Inc, the world’s biggest online retailer, as the giant's business, which is still largely brick and mortal, struggles to keep up.

Walmart’s online sales grew 23 percent in the fourth quarter that included the holidays. In the same period a year ago, sales grew 29 percent, while online sales were up 50 percent in the third quarter.

It was also slower than Amazon’s North American sales growth of 40 percent during the holiday quarter.

Walmart’s online performance was hurt during the quarter as growth fueled by the purchase of Jet.com began to lessen and the retailer struggled to balance its online inventory, Chief Executive Officer Doug McMillon said on a conference call with investors.

Erik Gordon, a professor at the Ross School of Business at the University of Michigan, said Walmart’s trouble figuring out online inventory during the quarter raised questions about its preparedness to fight Amazon.

The company posted about $11.5 billion in US e-commerce revenue for the year but lost money.

Analysts said the company’s price war with Amazon weighed on margins. In November, Walmart’s prices were within striking distance of matching Amazon’s for the first time.

Walmart recently asked vendors to supply more merchandise priced at $10 and higher in a push to turn an online profit.

Walmart forecast earnings of $4.75 to $5 per share for the current fiscal year on a 2 percent increase in US same-store sales. Analysts expected $5 per share for the same period.

Walmart also expects US e-commerce growth for the fiscal year to be around 40 percent.

In January, the retailer said it would raise the minimum wage for hourly employees to $11 an hour and offered a one-time bonus to store employees as it benefited from the new US tax law.

(REUTERS)