October 16, 2014, 10:54 AM

Wal-Mart will invest at least $1.2 billion in e-commerce next year

The projected investment for its coming fiscal year could reach as high as $1.5 billion, up from $1.0 billion this year, Wal-Mart executives say. Part of the spending will fund the construction of new fulfillment centers for online orders.

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Wal-Mart Stores Inc. announced yesterday the company will spend on e-commerce and digital initiatives an estimated $1.2 to $1.5 billion in fiscal year 2016, up from approximately $1.0 billion in fiscal 2015. The investments will go toward technology, infrastructure and other areas to support the company’s growing online business, said Charles Holley, Wal-Mart’s executive vice president and chief financial officer, at the company’s annual investor meeting.

Wal-Mart’s 2016 fiscal year runs from Feb. 1, 2015 through Jan. 31, 2016.

While it invests more in e-commerce, the world’s largest retailer will slow the growth in its bricks-and-mortar stores: Wal-Mart will add between 26 and 30 million retail square feet worldwide next year, a decrease from 32 to 34 million square feet this year.

“Our business and customers continue to evolve and so will the way we deploy capital,” said Holley. “We will invest more heavily in e-commerce initiatives, while temporarily moderating our global physical growth, particularly larger stores. We are focused on creating an endless aisle and appealing to our customers’ changing needs.” “Endless aisle” is a term Wal-Mart and some other retailers use to describe offering a broader assortment online than they can in any single store.

Holley also said Wal-Mart expects to finish with the year with $12.5 billion in global e-commerce sales. The company expects web sales to increase 25% in fiscal 2016, and growth from 2016 to 2018 to average 30% to 40%, Holley said. At the same time, Wal-Mart expects net sales growth to increase just 2% to 4% next year.

Neil Ashe, Walmart global e-commerce president and CEO also announced the company would build two new online fulfillment centers in Georgia and Pennsylvania, each measuring more than 1 million square feet. These centers are part of Wal-Mart’s “next-generation fulfillment network” that includes dedicated online fulfillment centers, distribution centers and shipping online orders from some stores, Ashe said. Wal-Mart will also add new fulfillment centers in Brazil and China in fiscal 2016.

“We are delivering best in class e-commerce capabilities that we are combining with the assets of the world’s largest retailer to engage with customers in new ways,” said Ashe. “We have delivered the core components of our new global technology platform.  We are expanding our next-generation fulfillment network to reach our customers fast and efficiently, and we’re building new data capabilities to enhance our customer experience.”

In addition to the investment and e-commerce news, Wal-Mart also lowered its estimates for sales for this year, partly due to a projected slow holiday season. The company now expects total sales to increase 2% to 3% this year, down from previous estimates of 3% to 5%. In August, Wal-Mart lowered its guidelines for fiscal 2015 web sales from 30% to 25% growth Walmart.com is No. 4 in the Internet Retailer Top 500 Guide.

Online holiday sales will increase between 13.5% and 14.0% this year, while total sales increase 3.5-4.0%, predicts accounting and consulting firm Deloitte. Retailers like Wal-Mart that cater to lower- and middle-income consumers have been growing more slowly than higher-end merchants due to weak growth in U.S. wages.

Wal-Mart has experienced faster e-commerce sales growth than even e-retail giant Amazon.com Inc. In 2013, Wal-Mart’s 30% global online growth in its fiscal 2013 year exceeded Amazon’s worldwide growth in online sales, which the Internet Retailer Top 500 Guide estimated at 20.3%. It was the first time in at least five years that Wal-Mart grew faster online than Amazon.

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