As it turns out, competing with Amazon can be expensive.
That’s the lesson Wal-Mart has learned, as the company lowered its earnings guidance for 2014 from between $5.10 and $5.45 a share to between $4.90 to $5.15 a share.
In its earnings release today, the company said the reduction came from increased investments in e-commerce, as well as higher-than-expected healthcare costs in the U.S.
“Our investments in e-commerce and mobile are very important, as the lines between digital and physical retail continue to blur. Our customers expect a seamless experience, and we’re working to deliver that for them around the world,” said CEO Doug McMillon in the release.
Walmart has been working hard to compete with the Seattle-based online retail titan, recently changing the layout of its website to try and draw more sales. Earlier this year, Walmart acquired Yumprint, and plans to use the Seattle-based company’s recipe technology to augment its online and in-store offerings.
That’s one of many acquisitions the giant retailer has announced in the technology arena in recent years.
The company’s efforts have been working so far, with Walmart reporting that its online sales in the third quarter have risen 24 percent year-over-year on a constant currency basis. Overall, Walmart reported that it brought in $120.1 billion in revenue during the past quarter, beating analyst expectations by $1.12 billion. The company’s quarterly earnings of $1.21 per share were in line with expectations.
Amazon hasn’t been taking the increased competition lying down. The company launched a new “Prime Pantry” service that allows customers to order a box filled with household essentials and get it shipped to their home for a flat rate. Amazon Fresh, the company’s grocery delivery service, hasn’t expanded past San Francisco, Seattle and Los Angeles yet, but Amazon entering the grocery delivery market could also put a squeeze on Walmart’s business.
Investors on Wall Street didn’t seem particularly fazed or particularly excited by the news. As of this writing, Walmart stock is trading at $74.09 a share, roughly flat from its close at $74.03 yesterday.
It is valued at $239 billion, compared to Amazon.com’s market value of $154 billion.
Editor’s note: Walmart global e-commerce head Neil Ashe is one of the featured speakers at this year’s GeekWire Summit. Tickets and details here.