Walmart Reports Strong Digital Sales, Likely to Sustain Momentum

Walmart’s (WMT) e-commerce sales continued to grow at a stellar rate during the fourth quarter of fiscal 2019. The retailer’s strong e-commerce sales are likely to boost investors’ confidence in its stock, as e-commerce sales have been the key driver of its improved comps.

Walmart reported 43% growth in its US e-commerce sales during the fourth quarter of fiscal 2019. Its e-commerce sales growth rate remained strong during fiscal 2019, with its sales rising 33%, 40%, and 43%, respectively, in the first, second, and third quarters of fiscal 2019.

Walmart’s stellar e-commerce sales are benefiting from the continued expansion of its online grocery pickup service, which is now offered in more than 2,100 stores. Walmart has also increased its grocery delivery service to ~800 stores.

Walmart’s assortment expansion further supports its online sales growth rate. The company has added ~2,000 new and exclusive brands to its website since April 2018.

In comparison, we also expect Target (TGT) to impress with its comparable digital sales growth rate in the fourth quarter. Target has been matching Walmart’s and Amazon’s (AMZN) digital offerings with expanded digital fulfillment options, fast delivery, and expanded offerings.

We expect Walmart’s e-commerce sales to continue to grow at a healthy pace, as the company plans to further enhance its grocery pickup and delivery services. Walmart expects to expand its online grocery pickup services to ~3,100 stores by the end of fiscal 2020. It also plans to grow its grocery delivery services to ~1,600 stores. Meanwhile, its focus on merchandising is expected to support its online sales in the coming quarters.

Walmart’s management expects its online sales to grow 35% in fiscal 2020, which is impressive given tough year-over-year comparisons. However, heightened competition could remain a drag.