WalMart (WMT) announced this week that it is shutting down Jet.com, the e-commerce site it acquired in 2016 for $3.3 billion.
When Walmart acquired Jet in 2016, its e-commerce growth had been slumping. In the three full fiscal years since the Jet acquisition, Walmart’s e-commerce sales nearly tripled. However, it became increasingly clear for Walmart that the best strategy going forward was to leverage Jet.com’s expertise and resources to fortify Walmart’s e-commerce offerings, rather than maintain two separate portals.
When asked if he would do the acquisition over again if he could, Doug McMillon, CEO of Walmart, answered affirmatively. “If you look at the trajectory of our business, it changed when we made that acquisition. Not only did we pick up Marc Lore … we picked up fulfillment centers — a lot of expertise that ended up paying off,” he said.
Following its acquisition by Walmart, Lore was appointed president and Chief Executive Officer of Walmart eCommerce U.S. From that point on, Walmart experienced double-digit online sales growth, culminating with its largest single increase to date in Q1 of 2020.
Walmart is in the midst of transitioning from a fulfillment center strategy to a larger retail footprint that allows for locations to serve as shipping center hubs as well. Ironically, Amazon, which began as a pure e-commerce business, may be headed in the same direction, as it is reportedly considering a deal to acquire JCPenney properties following the department store’s bankruptcy filing this month.
In a recent note to clients, UBS Analyst Michael Lasser made note of Walmart’s ecommerce gains, writing: “We expect WMT’s same store sales to moderate as stimulus benefits fade, high unemployment levels persist, & competitors reopen their doors. Still, WMT has several factors working in its favor as it gains digital share & sees incremental spend in grocery.”
Lasser assigned Walmart a Hold rating and price target of $130.
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