The stock price of Wal-Mart Stores (NYSE: WMT) surged driven by the strong performance of its e-commerce business, a sign that its competition against Amazon.com (NASDAQ: AMZN) is gaining momentum.
WMT shares closed $77.54 per share, up by 3.22% on Thursday. The retail giant gained more than 12% in stock value year-to-date. Its market capitalization is over 235 billion based on data from Google Finance.
Wal-Mart reported that its e-commerce business grew 63% and its gross merchandise volume—a measure of all products for sale online—increased 60% in the first quarter.
The retail giant reported that its total revenue increase 1.4% to $117.5 billion. Its earnings climbed 2% to $1.00 per share. It generated $5.4 billion in operating cash flow and returned $3.7 billion capital to shareholders through dividends and stock buybacks.
In a statement, Wal-Mart President and CEO, Doug McMillon said, “We delivered a solid first quarter and we’re encouraged by the start to the year. We’re moving faster to combine our digital and physical assets to make shopping simple and easy for customers.”
“Our plan is gaining traction, and I want to thank our associates for their hard work, ingenuity and commitment to our customers. Our customers have choices and we have to earn their business with every interaction,” he added.
In the second quarter, Wal-Mart expected to achieve earnings of around $1.00 to $1.08 per share.
Wal-Mart becomes a primary rival to Amazon
During a conference call with analysts and investors, McMillion said the retail giant’s online store is now offering 50 million products, up from 10 million last year.
He added Wal-Mart made a few strategic acquisitions to further improve its product assortments. The retail giant acquired Jet.com last year and Moosejaw and Modcloth earlier this year.
McMillon emphasized, “The acquisitions have received a lot of attention but our plan in e-commerce is not to buy our way to success. The majority of our growth is and will be organic. The acquisitions are helping us speed some things up.”
On the other hand, president and CEO, Walmart eCommerce U.S., said, “Customers are placing more repeat orders and spending more. The companies we have bought have helped to build our assortment and give us expertise in categories that are hard to crack.”
Commenting on the retail giant’s performance, Greg Portell, a partner at consulting firm A.T. Kearney, said, “All of a sudden, Wal-Mart is the primary competitor to Amazon, as opposed to a fragmented cluster of people,” as quoted by Bloomberg.
Jennifer Bartashus, an analyst at Bloomberg Intelligence noted that Wal-Mart discovered that selling groceries online attracts new customers. According to her, those shoppers are usually young families “who don’t want to drag their kids around a Wal-Mart.”
Data from research firm InfoScout showed that 42% of Wal-Mart’s regular monthly shoppers are members of Amazon Prime.
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