They say that all that glitters is not gold. However, we should not undermine those gems that don't glitter. This holds true for Walmart Inc.WMT , which unnerved investors when it reported a slowdown in its e-commerce sales growth in the fourth quarter of fiscal 2018. Nevertheless, this clearly seems to be an impulsive blow, as the slowdown was quite inevitable.
Before jumping to conclusions about this big-box retailer that has left no stone unturned to stand firm against Amazon AMZN , it must be noted that Walmart has completed more than a year since it acquired Jet.com. Thus, contributions from the latter was already factored in Walmart's e-commerce revenues in the year-ago period, which in turn weighed on the year-over-year growth rate this time.
So, for those who have been feeling skeptical about Walmart - the show is not over yet. It hasn't even been a month since investors questioned the company's e-commerce strength, and it has already taken several strides to solidify its performance. The company, which recently emerged as an omni-channel retailer officially, has been strongly focused on enhancing its grocery sales (both in stores and online), as grocery appears to be Walmart's major sales driver.
Solid Focus on Boosting Grocery Sales
Incidentally, the company recently introduced a completely new line of kitchen products in collaboration with Buzzfeed's Tasty. Tasty cookware, which offers more than 90 kitchen products and accessories ranging from $4.44 to $99.00, is now available at both Walmart's stores and website. Notably, Buzzfeed's Tasty is the biggest social food channel worldwide, with solid video viewership and Facebook FB fans.
This partnership is likely to benefit Walmart, as it will make Tasty's signature recipe videos accessible to Walmart's customers. Clearly, this alliance will help Walmart and Buzzfeed undertake new experiments and make more innovations in media, e-commerce and marketing.
Apart from this, there were rounds that Walmart will start providing prepared meals in its stores and has plans to expand this program to nearly 2,000 locations by the end of this year. Sources also revealed that the supermarket giant has plans to add four $15 meal-kit options across its stores. Well, the company already began selling meal-kits online last year through alliances with Home Chef and Takeout Kit - giving competition to other meal-kit players like Blue Apron APRN , HelloFresh and Plated.
These moves not only underscore Walmart's robust efforts to counter Amazon's growing dominance, but it also highlights the company's focus on enhancing grocery sales. Grocery sales have been contributing strongly to the company's top-line and e-commerce sales.
Further Growth in Store?
Apart from the aforementioned moves, the company has been taking several other e-commerce initiatives, including buyouts, alliances, and improved delivery and payment systems. Most recently, the company inked a deal with Rakuten (a leading Japanese e-commerce firm). Per the deal, both companies will collaborate to sell online groceries in Japan as well as e-books and audiobooks in the United States.
Apart from this, Walmart's buyouts of ShoeBuy, Moosejaw, Bonobos, ModCloth and Jet.com, and deal with Lord and Taylor underscore its quest to build an impressive digital brand portfolio. These factors have been driving this Zacks Rank #2 (Buy) stock for quite some time, as evident from its 30.3% surge in a year, in comparison with the industry 's 25.3% rise.You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
We believe that such noteworthy endeavors are likely to drive Walmart and position it strongly in its war with Amazon. Moreover, management expects U.S. e-commerce sales to soar nearly 40% year over year in fiscal 2019. This rekindles our confidence in the company's prospects, also giving investors enough support to recover from the whole e-commerce growth slowdown fiasco.
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