Walmart Q1 e-commerce sales surge 74% as company shuts down Jet.com, acquired for $3.3b in 2016

Jet.com was critical to Walmart's e-commerce strategy and omnichannel efforts, but is no longer necessary.

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Walmart said that its first quarter e-commerce sales were up 74% due to grocery pickup and delivery and added that it is discontinuing Jet.com, which was acquired in 2016.

Marc Lore, former Jet CEO, is now CEO of Walmart's US e-commerce group and was on the retailer's earnings conference call. 

The retail giant has fared well during the COVID-19 pandemic due to investments in digital transformation and the ability to ramp e-commerce operations. While expenses in the first quarter were higher, Walmart still delivered consolidated operating income of $5.2 billion, up 5.6% from a year ago. Walmart said its US e-commerce operations also curbed its losses.

Like Amazon, Walmart is one of the primary retail winners during the pandemic along with Target. Kohl's reported earnings and sales dropped more than 40%

In the first quarter, Walmart reported earnings of $1.40 a share with adjusted earnings of $1.18 a share. Revenue for Walmart was $134.6 billion, up 8.6% from a year ago.

Wall Street was looking for adjusted earnings of $1.12 a share on revenue of $132.7 billion. Walmart pulled its outlook for fiscal 2021. COVID-19 expenses in the quarter were $900 million including bonuses for associates, the launch of Express Delivery and hiring 235,000 new workers. 

Core items in the quarter include:

  • Walmart launched Express Delivery in US to deliver goods in under 2 hours as well as utilized its ship from store option in more locations.
  • Same store sales were up 10% due to food, consumables and health and wellness.
  • E-commerce sales were up 74%.
  • Jet.com, purchased for 3.3 billion in 2016, will be shelved but Walmart said the "acquisition of Jet.com nearly four years ago was critical to accelerating our omni strategy."

Walmart CEO Doug McMillon explained the Jet shutdown on the retailer's earnings conference call. 

Our tech teams are continuing to execute. For example, we've launched more than 70 new or accelerated capabilities in response to the  virus. We've done this while staying focused on core products, like one app and Express Delivery as well as building out the next-gen tech stack. We talked to you in New York about that a bit. 

Even as we continue to drive our strategy, we're maintaining discipline. We're reducing expenses in areas outside of the stores and clubs like hiring above store level, management consulting services and, of course, travel. We're continuing to review other areas of the business for efficiency opportunities.

One decision we've made is to discontinue Jet.com. While the brand name may still be used in the future, our resources, people and financial have been dominated by the Walmart brand because it has so much traction. We're seeing the Walmart brand resonate  regardless of income, geography or age. The Jet acquisition was critical to jump-starting the progress we've made the last few years. Not  only have we picked up traction with pickup and delivery, but our Walmart.com nonfood eCommerce growth accelerated after the arrival of Marc (Lore) and the Jet team. He leaned into the Walmart brand quickly. We don't anticipate a significant accounting charge due to this decision, and the vast majority of associates have previously been assigned to the Walmart brand.

Lore added that Walmart is building out its third party marketplace and seeing strides in growth and driving e-commerce profitability. Ultimately, Walmart plans to offer a broad assortment of product categories. Lore said: 

There are number of things that we've done during this period to create a healthy business coming out of it. Some of the things that we know we need to do long term to continue to curb these losses is keep the fix growing at a low rate when we grow sales at a high rate, driving mix into marketplace, which is driving mix into higher-margin categories, like home and fashion. And that means that we needed to continue to add brands. This is of a particularly good period of stretch for us. We're adding a lot of really good brands.