With Wal-Mart ramping up its online sales strategy to better fend off Amazon.com Inc, the move is starting to pay dividends.
The world’s biggest brick-and-mortar retailer, Wal-Mart Stores Inc has forecast a 40% rise in its U.S. online sales for 2018 as it pushes to ramp up competition with the world’s biggest online store Amazon.com Inc.
Wal-Mart has forecast a rise in its overall net sales by 3% in the year ending January 2019 and said it would it would buy back $20 billion of its shares over the next two years.
After the announcement, Wal-Mart’s shares rose by 4.5% to $84.13.
“We are going to lean into places like technology, e-commerce, international stores,” said Brett Biggs, Wal-Mart’s CFO at the company’s annual investor meeting, which was webcast.
Wal-Mart is battling Amazon for market share and has increased the investment in its online business by letting customers pick up online orders at its 4,700-plus stores. As part of this push, the company is also offering a free two-day shipping and said it plans on doubling the locations for shipping online grocery orders.
On Monday, it had said it would speed up the process for in-store returns of items bought on its website.
It has forecast an online sale of $11.5 billion for the fiscal year ending January 2018 and reported a sales growth of 62% for the first half of 2018, up by 12% in the year-ago period.
With its online strategy starting to pay off, the company is seeing a steady rise in e-commerce sales trajectory, which is outstripping its brick-and-mortar sales, leading to a slashing of new store openings.
Wal-Mart said, it plans on opening fewer than 15 super-centers in the U.S. and less than 10 neighborhood markets in the fiscal year 2019; this is half the stores it intends on opening in fiscal year 2018.
“Digital has been a recent highlight for WMT and it expects this momentum to carry into FY ‘19,” said UBS in a note. “Faster growth in (e-commerce) should lead to earnings pressure though, as this operation is likely still several years away from profitability.”
Wal-Mart said it expects to sink in $11 billion in capital expenditures in fiscal year 2018 and 2019.
Its new share buyback program replaces its existing $20 billion program it had announced in October 2015. In the seven quarters since, Wal-Mart had bought back $15.10 billion worth of shares.