Walmart saw its online sales increase 74 % during the coronavirus crisis, resulting in comparable sales growth of 10 %. Still, the American retail giant has decided to shut down its online branch Jet.com.
Game over for Jet.com
"Unprecedented demand" during the coronavirus crisis enabled Walmart to record a revenue growth of 8.6 % to 134.6 billion dollars& (123 billion euros) in the first quarter of its financial year 2020, which closed at the end of April. While analysts forecast a 7.2 % increase, comparable sales rose 10 %. Most notable was the explosion in online sales, up by 74 %.
"Our omnichannel strategy, enabling customers to shop in seamless, flexible ways, is built for serving the needs of customers during this crisis and in the future", USA Today quoted CEO Doug McMillon.
In this context, the announcement of the termination of Jet.com may come as a surprise. America's biggest retailer bought the online platform in 2016 with the stated goal of learning how to compete with Amazon from the technology start-up. Today, the main lessons seem to have been learned: Jet's employees are all integrated within Walmart and are working on innovation and digitisation projects such as the Intelligent Retail Lab (IRL).
900 million Covid costs
A large turnover growth does not mean a large profit growth, however: the growth linked to the coronavirus crisis is costing supermarkets a lot of money. For example, Walmart had to hire 200,000 additional employees and pay 755 million dollars (700 million euros) in bonuses to store staff. In total, the coronavirus is estimated to have cost the company more than 800 million euros in the first quarter.
For the rest of the year, Walmart abandoned its forecast due to "unprecedented volatility" in the economic situation. However, the second quarter appears to have started well, even though the group also announced last week that it would pay 390 million dollars in additional bonuses to its employees.