Why Walmart Still Has a Big Opportunity Online

NEW YORK (TheStreet) - Walmart (WMT) is investing significantly behind e-commerce as part of its global growth plan. While an argument can be made that the Bentonville, Ark.-based company missed its opportunity by not growing its online strategy earlier given Amazon's (AMZN) dominance, at least one analyst says Walmart still has "significant" opportunity to gain share in both domestically and abroad.

"The opportunity is significant in the U.S. and globally," UBS analyst Jason DeRise wrote in a note to clients. "The integration of digital with physical stores, while leveraging the current supply chain is critical to allow its offering to be effective, efficient, and potentially ROIC [return on invested capital] accretive if done right. In the U.S., the small store rollout is key." DeRise shares Walmart shares "buy" and has a $86 price target.

Walmart's global e-commerce sales rose by 30% last year, with the company expecting sales to rise another 30% this year. Though the number is off of a small base -- approximately $10 billion, or 2.1%, of the retailer's $473 billion in sales last year -- that shows there's plenty of room for Walmart to take share from Amazon if it's done right.

It's apparent why Walmart must focus on growing its e-commerce strategy, and getting its customers comfortable shopping online. Same store sales at the world's largest retailer are suffering. U.S. same-store sales fell 0.4% for the Jan. 31-ending year.

Growing U.S. e-commerce sales by 15%-20% compound annual growth rate (CAGR) could add 30 to 60 basis points to Walmart's annual comparable sales, as its share of U.S. sales increases from 2% to more than 3%, DeRise estimates. In the January-ending quarter, e-commerce sales added 30 basis points to Walmart's U.S. comps and 40 basis points to Sam's Club same-store sales, he added.

Last year, Walmart spent roughly $540 million pre-tax or 11 cents a share in 2013 investing in e-commerce. This year, it plans to spend an additional 2 cents to 4 cents a share this year, DeRise wrote.

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