While Walmart is fighting hard to give matching rivalry to Amazon.com, it is also facing criticisms of the costs of that fight and that is creating some concerns among the investors of the in the company.
The profitability of Walmart is being hit because of the company spending large amounts in investments such as purchasing of Jet.com for $3.3 billion as it tries to rival and challenge the dominance of Amazon in the e-commerce segment. Many6 believe that the spending has hit the company so hard that it has been forced to issue warning of losses of more than $1 billion for the e-commerce business of the company in the United States for the current year against an anticipated sale of between $21 billion and $22 billion, claimed a report by Vox quoting information from multiple sources with information of the matter and knowledge about those financials.
There has however been no comment available from Walmart.
There is reportedly increased frustration within the company because of the mounting nature of the losses to US e-commerce business. There are also reports that Walmart is planning to sell off some of the digitally native brands that had been acquired to increase inventory while taking advantage of expertise of younger, e-commerce leaders. According to the report in Vox citing sources, divesting menswear brand Bonobos and women’s clothing retailer Modcloth has been discussed within Walmart in recent months. It has been reported that ModCloth is likely to be sold by this year at a loss compared to the purchasing price while planning to retain the Bonobos brand.
Reports also claimed that Walmart has decided not to make any more acquisitions of brands that are digitally native for at least one year “barring an incredible acquisition opportunity that is just too good to pass up.” Rather, it would adopt a strategy of growing its own brands such as what it did for the growth of the mattress brand Allswell.
The company had earlier predicted the increased losses in 2019 because of its operations in e-commerce business.
Walmart has also started a process of greater integration of the e-commerce platform of Jet with its own business, the company had announced some time back. As part of the changes, Jet president Simon Belsham is expected to leave the company in August, with that role dissolving entirely.
According to the Voix report, Walmart US CEO Greg Foran – in charge of the bricks-and-mortar stores of the company wants to reduce prices of items instead of building digital brands further which has clashed with the plans of the US e-commerce team. There are also reports that more is being spent by the company on company for growth of its online grocery business while it is mostly reliant on the network of physical stores of the company.
Walmart shares were down less than 1% Wednesday morning. The stock has rallied 19.4% this year, while Amazon shares are up 29%.
(Adapted from CNBC.com)