May 19, 2020
Walmart, the world’s biggest brick-and-mortar retailer and the largest seller of DVDs and Blu-ray Discs, on May 19 reported it would discontinue Jet.com, which it acquired four years ago to assist in its effort to combat online goliath Amazon.
The announcement came in its financial report for the first quarter ended May 1, in which revenue totaled $134.6 billion, up 8.6% from the comparable period in 2019, in part due to “unprecedented demand” during the COVID-19 pandemic, according to Walmart. Since Walmart carries groceries, the chain was one of only a few retailers, mostly grocers and pharmacies, allowed to remain open after governors in most states closed all but “essential” businesses.
Operating income grew 5.6% to $5.2 billion. Walmart U.S. comp sales increased 10%, led by strength in food, consumables, health and wellness, and some general merchandise categories. Walmart U.S. eCommerce sales grew 74% with strong results for grocery pickup and delivery services, walmart.com, and marketplace, according to the company.
“More than ever, the news this quarter is our amazing associates. They are rising to the challenge to serve our customers and our communities. I’m proud of how they’re adapting and performing. 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,” president and CEO Doug McMillon said in a statement.
The chain is nixing Jet.com, which it acquired in 2016 for $3 billion, because the Walmart.com brand is strong, it reported.
“Due to continued strength of the Walmart.com brand, the company will discontinue Jet.com,” read the Walmart press release. “The acquisition of Jet.com nearly four years ago was critical to accelerating our omni strategy.”
On an afternoon earnings call with analysts May 19, McMillon elaborated, “While the [Jet.com] brand name may still be used in the future, our resources, people and financials have been dominated by the Walmart brand because it has so much traction. We’re seeing the Walmart brand resonate regardless of income, geography or age. The Jet acquisition was critical to jumpstarting the progress we’ve made the last few years. Not only have we picked up traction with pickup and delivery, but our Walmart.com non-food e-commerce growth accelerated after the arrival of Marc and the Jet team.”
The news comes on the heels of Walmart shedding online movie site Vudu. Last month, Comcast-owned movie ticket and transactional VOD service Fandango announced the acquisition of Vudu.com from Walmart for an undisclosed amount. Vudu, which Walmart acquired 10 years ago for $100 million, will continue backend support for Walmart’s online digital movie business, while existing Vudu subscribers will still have access to content stored in the cloud.
On an earnings call on the afternoon of May 19, McMillon noted that since the pandemic-triggered quarantine began in the middle of March, “we’ve hired more than 235,000 associates in the United States. The majority are on a temporary basis to help relieve some of the burden faced by our associates in stores and supply chain facilities, as well as to help provide opportunities for people who’ve been displaced from their previous jobs.”
He noted that as the pandemic spread, “we saw the mix of sales ship heavily towards food and consumables. … We experienced unprecedented demand in categories like paper goods, surface cleaners and grocery staples. For many of these items we were selling in two or three hours what we normally sell in two or three days.”
As the quarter progressed, McMillon added, “we saw a second phase related to entertaining and educating at home, puzzles and video games took off. Parents became teachers. Adult bicycles started selling out as parents started to join the kids. An overlapping trend then started emerging related to DIY and home related activities. Think games, home office, exercise equipment and alike. It was also clear a lot of people were taking a do-it-yourself approach as they bought items like bandanas and sewing machines to make masks. We can see customers looking to improve their indoor and outdoor living spaces, our home categories in stores and online took off.
“Toward the end of the quarter another phase emerged, COVID relief spending as it was heavily influenced by stimulus dollars leading to sales increases in categories such as apparel, televisions, video games, sporting goods and toys.”