Apparently being late to the game doesn’t always make you the loser.
Wal-Mart Stores (NYSE: WMT) announced this week that it expects its U.S. e-commerce sales to surge 40% in the next fiscal year as its digital activities try to play catch-up with Amazon.
The positive guidance sent Wal-Mart’s stock soaring with its biggest rally in more than a year, signaling that its bet on e-commerce is starting to pay off.
CEO Doug McMillon has allocated more than one-third of Wal-Mart’s total capital spending budget to digital initiatives—initiatives like specialized e-commerce distribution centers—up from just 20% a few years ago.
Moody’s analyst Charlie O’Shea said in a note, “It is clear that Wal-Mart intends to continue to turn up the heat online… We still believe Amazon’s lead in online retail is insurmountable; however, Wal-Mart continues to widen the gap between itself and all other brick-and-mortar retailers.”
Wal-Mart is planning to add 1,000 online-grocery locations, which is nearly double the current number of locations. These sites help fill orders from customers buying their food from walmart.com. The company has also introduced a simplified way to reorder products bought frequently, free shipping on orders of $35 and up, and discounts on thousands of products purchased online and picked up in-store.
The company is also teaming up with Google to give shoppers the ability to order by voice, and said this week that it is making its returns process simpler and faster for customers using its mobile shopping app. It has also rolled out curbside pickup of online grocery orders in nearly 1,000 of its U.S. locations, putting it far ahead of rival Target.
The company’s investments in their digital platform have already helped to boost sales. The company expects to reach online revenue in the U.S. of $11.5 billion this year. Their online division saw increases of at least 60% over the last two quarters, four times the growth rate of the broader e-commerce sector. The retailer said in a forecast issued before its shareholder meeting on Tuesday that total sales are expected to grow at or above 3%.
As the company focuses more on its online activities, its pace of new store openings has slowed. The retailer has plans to open fewer than 15 super centers next fiscal year, which is down from 35 additions this fiscal year. Wal-Mart will also open fewer than 10 of its Neighborhood Markets, its grocery store-sized locations that have been a key driver of growth in the past few years.
But McMillon said, “We have good momentum in the business. We’re executing our strategy and moving with speed to win with the customer, who is more connected than ever.”