Wal-Mart's Struggling Online Business Is A Big Concern

Nov. 20, 2015 2:27 AM ETWalmart Inc. (WMT)31 Comments
CuriousObserver profile picture


  • Wal-Mart same store sales were up 1.5% in the latest quarter.
  • The market reacted positively by chasing the stock up.
  • But the online business was only up 10%.
  • Wal-Mart's weakness in the online business is a big concern.

On the morning of November 17, Wal-Mart (NYSE:NYSE:WMT) reported results that impressed Wall Street. The stock moved from $57.87 the previous day to close at $59.92 by the end of the regular trading day, a spike of 3.54%. In the wake of the earnings release, several Seeking Alpha authors have turned bullish.

While the gain is impressive, this article will examine the reported numbers more carefully to unearth an important concern moving forward. But first, I will examine why the market rightly responded positively to the same store sales metric.

Same Store Sales Met Expectations

In my previous article published just days before the earnings release, I argued that same store sales growth (referred to as comp sales in the Wal-Mart world) is the single most important number for investors when judging the performance of a retailer. I also argued that Wal-Mart's Q3 growth of same store sales needs to be at least 1.5% in order to meet market expectation.

Coincidentally, the Q3 same store sales for Wal-Mart U.S. has grown by exactly 1.5%. More impressively, same store traffic has grown by 1.7%, but the average spending per customer has declined 0.2%. Small format stores turned in even stronger performances, reporting same store sales of 8%.

Market sentiment had been negative since the company declining EPS guidance at the October 14 investors meeting. When same store sales, which is the most important measure of retail store success, met expectation, the one-day 3.5% increase in stock price is completely understandable. However, there are a few numbers buried in the earnings release that do not bode well for Wal-Mart.

Wal-Mart's Online Business Slowing Down

Important information about the digital business is buried in page 6 of the earnings call transcript. In typical Wal-Mart fashion, when a strategic business unit of the company did

This article was written by

CuriousObserver profile picture
My trading approach is to focus on public but non-obvious information that had not yet been fully digested. I focus on data that had been publicly announced, but where analysts had not yet connected the dots.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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