Transcription
Andrew, I'll start with you. 43% increase in e-commerce sales. They said that they're taking market share. Who are they taking it from? Amazon, probably not. Know they're taking it from grocers mainly because most of that growth is coming in in food. They're also taking it somewhat from other general merchandisers, like in toys. They had a good quarter online toys, but most of it, the lion's share of it, is coming in grocery.
Oliver, obviously this is a company that's spending a lot of money to really essentially reinvent itself, really push out in terms of e-commerce sales. How much is this quarter a reflection of the company itself versus the health of the US consumer, especially given that really weak retail sales number we got last week?
Yeah, Morgan. I think it's a combination. Walmart's doing a very good job aggressively competing in e-commerce. What's very impressive is curbside pickup. Curbside pickup at about 2100 locations enables you to drive up, get your groceries, and leave. It's very convenient. It's about 70 percent of the US, and based on our Cowen survey, about 8 to 10 percent of America uses this. So thinking about the future of Walmart and retail, it is about combining physical stores and digital. And keep in mind Walmart has 90% of the population covered within 10 miles of a Walmart. They're doing a great job executing, and specifically online they're broadening the assortment in terms of adding new brands, and they're also giving consumers many ways to shop online, from curbside to delivery to buy online pick up in store to automated pickup towers. But you're right, we're in a very good consumer environment.
Oliver, is that the next front for Walmart? I mean, we saw the Superbowl commercial with all the the car is coming to pick up. It seems like that's an idea that they're pushing. But I feel like too often sometimes we can set it up as well. Amazon. Walmart has to become Amazon. Does Walmart have to kind of lead this omni-channel revolution that's happening now? And is that store pickup a key part of that?
Store pickup will be huge because customers love this service. It has very high Net Promoter scores. Also, the amount of money people spend on the curbside service is about double in-store, so it's very well received, highly satisfied people. And the future of retail, it's quite simple: saving customers time and money. Curbside really answers this, and Walmart will use its assets. What are its assets? Its these physical stores. It's also thinking about how tough it is to do grocery in the organic food supply chain. They have Walmart academies that train over a quarter million employees every year. That's an important weapon in this battle versus Amazon. We're seeing very good customer satisfaction based on our surveys. We're also seeing more and more shoppers stay with Walmart and a little bit less at Amazon as we look at shopper overlap. So Walmart has been holding its own in grocery, and food and curbside are big, major sustainable competitive advantages that will really transform how Americans shop for grocery.
Andrew, Walmart sticking with its fiscal 2020 guidance in terms that 16 billion-dollar Flipkart acquisition in India. New regulations taking place in that country. How much of a risk is that to this company and the stock?
It's quite a risk. First, I want to agree with Oliver on the curbside pickup being a, you know, great driver. I just want to point out that home delivery is probably the next growth vehicle. And we just did a consumer team survey at Loop. We saw that Millennials are not increasing their uptake of home delivery because they don't want to pay the delivery fee. Amazon's well-positioned because they're doing it through Whole Foods for free. So Walmart, Kroger, they're charging about $10 a delivery. As that takes off, you're gonna see earnings dilution increase from that as well. Flipkart is very diluted. If they're already guided to 55 to 60 cents here in 2019, the Indian government recently completely pulled the rug out from under them on regulating e-commerce by foreign-owned entities, meaning Walmart, which owns Flipkart, and Amazon's in multi-billion dollar investment there as well. And on their call today, they said they think they can manage through that without changing their guidance, but they were somewhat equivocal. So it's a--we're seeing India look. We thought it was not a good corporate governance boo, but gave them at the benefit of the doubt, and at least a disjunction. We're sorry to say that it looks like it's worse than we thought.
Hey, Oliver, just on the shares. You'd look at a very long-term chart. You can see they were, you know, 110 or so last February. That was pretty much the top in in the early part of last year. 106 in November, 104 pressing on now. I mean, is a lot of the would been chopped already? We see continued upside here. What we believe here is scale matters and being bigger, as well as the global dividend yield. And this is a stock that will work in our view through good times and bad, as this concept appeals to all kinds of consumers. Walmart being generally a lower beta stock as well. The story here is also margins. This growth is coming at a cost, so US gross margins were down about 27 basis points as the company continues to invest in price and offer consumers the best value. But we like the stock for the long term, and as we think about these building blocks for really sustainable competitive advantages, we think it's a good value despite the stock running and the stock having upside today.
Andrew, where do you stand on the stock, and to today's results change that for you?
We're holes with 102 price target. I thought the result, I mean the sales were terrific in the US, I know, but the US operating margin was operating profit was up slightly, consolidating our operating profit up slightly, and this is all the the cost of growing and omni-channel e-commerce business. In the long run, I completely agree with Oliver, they're a long-term winner. In the near term, let's say 2019, there's just not a lot of leverage. There's a lot of technology that has to be introduced, particularly in grocery, to bring down the cost of picking. Walmart has said they have thirty-five thousand personal shoppers in their store shopping for people. Think about the cost that is added to Walmart's cost structure. So until that is cert becomes more robotically or solved other ways, but mainly robotically in-store in our dedicated facilities, it's going to be a cost burden as they grow e-commerce. You you