Walmart Inc (NYSE: WMT) announced on Tuesday that it will be expanding its U.S. grocery delivery service nationwide to more than 100 metro locations. Walmart had been testing grocery delivery with partner Uber in six cities, but the expanded delivery service will include 800 stores and cover deliveries to 40 percent of Americans.
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WMT said it will continue to expand the service to include around 2,200 of its stores by 2019.
For shoppers who want to try out the grocery delivery service, there is no subscription required. Orders must include a minimum of $30 of groceries, and customers must pay a flat $9.95 delivery fee. However, Walmart is offering free delivery and $10 off for each customer’s first delivery order of at least $50.
Walmart is not alone in expanding its grocery delivery business. Amazon.com, Inc. ( AMZN) is currently offering Amazon Prime grocery delivery in six cities, including Atlanta, San Francisco, Austin, Cincinnati, Dallas and Virginia Beach. Kroger Co. ( KR) and Target Corp. ( TGT) have also been working on grocery delivery services.
WMT stock: What do analysts think? Analysts are still on the fence about Walmart’s online sales growth outlook.
CFRA analyst Joseph Agnese says Walmart’s focus on expanding delivery services and speeding up delivery times will help it gain market share from its brick-and-mortar competitors.
“We expect EPS growth over the next 12 months to benefit from more favorable food inflationary levels and increased store traffic due to an improved customer experience in stores and online,” Agnese says.
Expanded grocery delivery could help WMT rekindle its slowing online sales growth, which declined from 50 percent in the third quarter of 2017 to only 23 percent in the fourth quarter. Earlier this month, Oppenheimer analyst Rupesh Parikh said Walmart’s guidance of 40 percent online sales growth in 2018 may be “a stretch.”
“We are increasingly concerned that with recent key drivers of outsize e-commerce sales expansion potentially waning and given our now more muted EPS growth expectations, the valuation at which shares trade could prove capped,” Parikh wrote in a downgrade note.
Agnese says Walmart’s online sales should bounce back this year.
“We expect global e-commerce sales to rise significantly to over $22 billion in fiscal 2019 ($16.0 billion in the U.S.) and become a key source for long-term growth,” he says.
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CFRA has a “buy” rating and $109 price target for Walmart shares. Oppenheimer has a “perform” rating and $93 target for WMT stock.
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Walmart Inc (WMT) Is Directly Challenging Amazon.com, Inc. (AMZN) originally appeared on usnews.com
