A boost in US holiday sales helped retail behemoth Walmart Inc’s profits surge at the end of last year, but store executives on Tuesday acknowledged that they have not yet solved the profitability riddle for the fast-growing online business.
The world’s biggest retailer, which has been investing aggressively to adapt its US stores to the digital era by adding more in-store pickup and delivery of smartphone orders, reported profits of US$3.7 billion in the three months ending on Jan. 31, up nearly 70 percent from the same period a year earlier.
Total revenues increased a more modest 1.9 percent to US$138.8 billion, the company said.
Higher comparable sales at Walmart’s namesake US stores — the source of two-thirds of revenues — offset declining sales at Walmart International and Sam’s Club stores.
Executives touted gains in market share over the holiday season in toys and groceries.
The company scored a 43 percent jump in e-commerce sales, its latest increase following acquisitions of smaller digitally oriented retail companies, and revamping its operations with new smartphone application features and customer offerings.
Often seen as a rival to Amazon.com Inc in the retail big leagues, Walmart offers grocery pickup at more than 2,100 of its 4,755 US stores and delivery at nearly 800 locations.
However, traditional brick-and-mortar retailers have struggled to attain the same level of profitability on digital sales compared with their legacy businesses, in part because customers increasingly demand delivery of goods at no extra charge.
Walmart’s approach has been to “be there when where and how” customers want, as chief executive Doug McMillon put it in a news release.
That strategy has boosted sales, but is not yet profitable. The company has signaled that it expects losses in its e-commerce business to grow over the next year, due to spending on same-day grocery delivery and technology.
“It’s loud and clear to us that the customer is really busy so if we can find ways to make things more convenient for them with delivery and pickup, they’re all over it,” McMillon told analysts.
The company’s grocery services had expanded its customer base, but the biggest challenge was to improve the “merchandise assortment” of the digital orders with more high-margin products in addition to staples that have tight profit margins, he said.
Walmart is exploring other innovations, such as a crowdsourced grocery delivery pilot program.
The system could ultimately evolve to one where Walmart delivers groceries within a window of time, McMillon said.
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