Walmart's online sales growth stalls in the fourth quarter

Walmart reported fourth quarter e-commerce sales growth of 23 percent, marking a significant decline from 50 percent growth the previous quarter.

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Image via Walmart

Walmart's usually red-hot online sales growth is showing signs of a cool down. The world's largest retailer on Tuesday reported fourth quarter e-commerce sales growth of 23 percent, marking a significant decline from 50 percent growth the previous quarter.

Walmart CEO Doug McMillon said the quarterly decline was mostly expected and related to lower sales on Jet.com, however, he also cited some unexpected operational challenges that negatively impacted growth during the holiday quarter.

Walmart said the operational blame goes to inventory replenishment and out-of-stocks, which have plagued the retailer for years and are especially damaging to sales during key shopping periods.

Overall, Walmart wrapped up 2017 with online sales growth of more than 40 percent for the year. "So, we feel better about the year than the quarter," McMillon said.

Walmart also revealed in its Q4 financial report that it has reduced marketing spend for the Jet.com business in favor of luring more customers, at a lower cost, to Walmart.com.

"Due to this change, Jet will not grow as quickly as it did in the early days but it will be well-positioned where we've chosen to focus the brand," McMillon said. "We'll continue to evaluate ourselves on the total US eCommerce growth number."

In terms of technology and other strategic investments, McMillon said Walmart will expand online grocery services in the US this year and broaden its delivery capabilities globally. McMillon touted Walmart's progress so far on improvements to mobile and digital, including reorder online, Scan & Go and digitized returns.

As for the numbers, Walmart reported net income of $2.17 billion, or 73 cents a share. Revenue climbed 4.1 percent to $136.3 billion with non-GAAP earnings of $1.33 a share. Analysts expected revenue of $134.9 billion and earnings of $1.37 a share. Shares of Walmart were down nearly 10 percent in early trading.

Looking to the full year, Walmart is expected non-GAAP earnings per share ranging from $4.75 to $5.00. Wall Street is expecting $4.97 a share on revenue of $511.9 billion.

Walmart reiterated its digital push in December, announcing a change to the company's legal name from Wal-Mart Stores, Inc. to Walmart Inc effective as of Feb. 1. Walmart said the move is to reflect that shopping doesn't just take place in retail stores, but customers also want to shop online, on their mobile device, or through pickup and delivery.

Walmart is also making an aggressive push into online grocery and increasing capital spending on digital supply chain capabilities and in-store technology. Walmart's e-commerce site now sells more than 50 million different types of items, up five times more that it offered just one year ago.