E-Commerce Should Spark Walmart’s Fiscal 1Q16 Performance



Walmart to report fiscal 1Q16 earnings

Walmart (WMT), the world’s largest retailer, will report its fiscal 1Q16 results for the current fiscal year on May 19[1. Quarter ended April 30, 2015]. Consensus Wall Street analyst estimates expect the company to report revenues of $116.3 billion, up 1.1% from $114.9 billion in 1Q15.

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E-commerce initiatives and prospects

Higher e-commerce sales should be a major growth driver for Walmart, both in the current quarter and in years to come. Over the past five years, Walmart has grown its overall sales at a CAGR (or compounded annual growth rate) of 3.5% to $485.7 billion in fiscal 2015. In comparison, Walmart’s e-commerce sales grew 21.2% year-over-year to ~$12.2 billion in fiscal 2015.

Target (TGT), Walmart’s (WMT) main competitor, reported an even higher growth rate in online sales, albeit from a smaller base. Target’s e-commerce sales grew 30% year-over-year to ~$3 billion in the last fiscal year.

This year, or fiscal 2016, Walmart expects its e-commerce sales to grow at an even faster clip. The company is projecting growth in the mid-20s percentage range, outpacing global growth rates in e-commerce. Assuming a 25% growth rate, this translates to web sales of ~$15 billion, or ~3% of total sales. We’ll delve into the company’s e-commerce guidance in more detail in Part 5.

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Amazon challenge

On May 13, Walmart announced it was testing unlimited shipping for $50 per year. This would present significant competition to Amazon’s (AMZN) Prime service, which costs $99 a year and has been operational for about ten years[2. Source: Mashable].

Same-store sales

E-commerce also tended to improve Walmart’s same-store sales metrics. Its e-commerce growth boosted the reported same-store sales metric by 0.3% in 4Q15 for Walmart US. In the next article, we’ll discuss same-store sales and other revenue drivers.

Walmart (WMT) constitutes 0.7% of the portfolio holdings in the SPDR S&P 500 ETF (SPY) and 2.9% of the SPDR Dow Jones Industrial Average ETF (DIA), respectively.


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