Wal-Mart Updates: Weaker Q4 Weighs on Shares

This past week has been eventful for Wal-Mart (NYSE:WMT) as it reported a near 6% increase in net sales, led by impressive growth in its international segment which witnessed a 15% increase. However, the retailer’s low pricing strategy to attract customers during the holiday season resulted in a 15% drop in Q4 profits. Wal-Mart also missed analysts’ sales estimates for Q4 by approximately 0.8%, according to Thomson Reuters. Investors have reacted negatively with the share price witnessing a 6% decline since the earnings announcement on February 21.

Wal-Mart announced that it has increased its stake in Yihaodian, a fast-growing Chinese online retailer of groceries, consumer electronics and apparels, to 51%. Wal-Mart has been aggressively looking to increase its online sales and has taken several initiatives in the past year in this regard. According to a study by Boston Consulting Group, China’s e-commerce industry is expected to surpass $118 billion in gross merchandise value in 2011. By 2015, the Chinese e-commerce market is most likely to surpass the U.S. e-commerce market.

China’s low cost of shipping is expected to provide a further boost to this growing market and could be a key reason that Wal-Mart is looking to expand its online role. We are optimistic about Wal-Mart’s efforts to build its e-commerce business. By increasing its stake to a majority stake in Yihaodian will help Wal-Mart further strengthen its presence in the Chinese e-commerce market.

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