Walmart Stores Inc. (WMT) is jetting out, so to speak.
The world's largest retailer will be reducing marketing investments in Jet.com, the e-commerce platform that it acquired for $3 billion in 2016, as it courts more customers for Walmart.com and focus on grocery delivery. But growth ahead will be steady as its e-commerce platform matures, the company said.
"The cost to acquire a new customer on a nationwide basis is cheaper with the Walmart brand, so we've been investing more in Walmart.com on a national basis and reducing marketing investment in Jet, except in certain urban markets," CEO Doug McMillon said in the fourth-quarter earnings call Tuesday.
As a result, Jet "will not grow as quickly as it did in early days," he added.
The supermarket chain posted an overall e-commerce slowdown in the fourth quarter, during which online sales grew by 23%, down from third quarter 50%. The slump, according to McMillon, was mostly expected as the immediate impact from the Jet.com acquisition wore off. The slow growth was also a product of spikes in season inventory, which harmed basic, everyday items and inventory for e-commerce, he said in the earnings call.
Walmart's digital shift back onto its namesake brand was factored into its decision to acquire Jet.com, the company said. The online startup always had a presence among "urban, Millennial, higher-income customers" — a demographic with which Walmart has long struggled. Now, with Jet under its belt, Walmart is again the priority.
Walmart is certainly not loosening its clamp on Amazon.com Inc. (AMZN) . The Bentonville, Ark.-based chain spent just under $5 billion for a 40% stake in India's largest digital commerce company, Flipkart, according to reports last week.
Walmart also underscored Tuesday its goal of expanding online grocery capabilities in 2018, although it did not make any announcements about new developments.
"We'll lean in this year by nearly doubling the number of online grocery locations in the U.S.," McMillon said. As of November, the service was available at more than 1,000 stores. In 2018, Walmart will introduce online grocery at an additional 1,000 locations.
"I think part of what we're doing now is just letting the business mature and learning how to become stronger operationally in e-commerce," he told analysts.
Walmart posted a less-than-stellar quarter Tuesday morning, reporting earnings per share of $1.33 — compared with the Wall Street forecast of $1.37. Same-store sales rose 2.6% and revenue reached $136.3 billion, both exceeding predictions. Still, shares dropped more than 10% at Tuesday's close, trading at $94.11.
The earnings miss was in part due to company "cleanup," including the sudden closures of 63 Sam's Club locations earlier this year, discontinuing real estate projects and a bond tender, CFO Brett Biggs said.