NEW YORK (AP) -- Walmart is getting bruised in its battle with online leader Amazon.
The world's largest retailer on Tuesday reported a smaller-than-expected fourth-quarter profit as it wrestled with slower e-commerce sales during the busiest time of the year. The results underscore the company's challenges in a fiercely competitive retail landscape.
Its stock took a beating, falling 10.2 percent to post its biggest single-day percentage drop in 30 years. Its decline was a big factor in a drop of 1 percent by the Dow Jones industrial average.
The fourth-quarter profit numbers overshadowed the discounter's better-than-expected sales at its established stores and higher customer traffic as online services linked to its stores attract more shoppers.
The company's mixed results raise concerns its push to narrow the gap between itself and Amazon.com Inc. may be losing steam. This despite it making huge investments in both its digital business and its stores, where it has taken steps like lowering prices.
Walmart's e-commerce sales growth in its U.S. business slowed to 23 percent during the fourth quarter, a sharp decline from 50 percent in the third quarter. It noted last year's results got a big boost from its acquisition of online retailer Jet.com.
But it also acknowledged its own mistakes — a surge of TVs, toys and electronics into its warehouses during the peak periods of the holiday season crowded out more basic items. Still, Walmart finished the year with more than 40 percent growth in online sales in the U.S., and it expects that online sales will be revived this year to hit that same pace.
Walmart and other retailers are looking at new ways to compete in light of swiftly changing shopping habits. Albertsons Cos., the owner of Safeway and other grocery brands, announced Tuesday it is buying the drugstore chain Rite Aid.
Walmart itself is building fewer big stores and focusing on investments in its online business while beefing up benefits for its workers.
Since buying Jet.com for more than $3 billion a year and a half ago, Walmart has added online services, acquired brands like Bonobos and ModCloth and vastly expanded the number of items available online. Walmart is also getting ready to launch an overhauled website with a focus on fashion and home furnishings. It has teamed up with Lord & Taylor to create dedicated space on its site.
Walmart has aggressively cut prices and plans to double the number of stores where groceries can be ordered online and picked up curbside this year to 2,000 locations.
"We're accelerating innovation in the business to make shopping faster and easier for our customers," said Walmart CEO Doug McMillon,
But Walmart has a long way to get even close to Amazon's online dominance. Amazon.com Inc. has leveraged its $99-a-year Prime membership program into intense loyalty from customers, and it's recently stepped into Walmart's turf, no longer content with only online sales. After spending $14 billion to acquire Whole Foods last summer, Amazon just announced two-hour delivery from the grocery chain for its members.
Walmart Inc., based in Bentonville, Arkansas, earned $2.17 billion, or 73 cents per share, in the three-month period ended Jan. 31. That compares with $3.76 billion, or $1.22 per share, in the year-earlier period.
Excluding charges, Walmart earned $1.33 per share. The results fell short of Wall Street expectations. Analysts surveyed by Zacks Investment Research were calling for earnings of $1.36 per share.
The world's largest retailer posted revenue of $136.27 billion, exceeding the average analyst estimate of $135.04 billion.
Revenue at stores opened at least a year rose 2.6 percent at its namesake U.S. stores. That marked the 14th consecutive quarter of increases. Customer counts rose 1.6 percent.
At Walmart's Sam's Clubs, same-store sales rose 2.4 percent in the fourth quarter. The company announced earlier this month that it was offering free shipping for premium members and simplifying its membership tiers.
Last month, Sam's Club began closing 63 U.S. clubs while turning a dozen of them into warehouses for digital sales, with the goal of speeding up deliveries.
The company said Tuesday that its federal corporate tax rate for the current year will be between 24 and 26 percent due to the new tax reform. Walmart's previous tax rate was 32.5 percent. Walmart's Chief Financial Officer Brett Biggs said that it expects a cash benefit of $2 billion for the year.
Its shares ended Tuesday down $10.67 to $94.11, its biggest single-day drop in percentage terms since Jan. 8, 1988.
AP Health writer Tom Murphy in Indianapolis contributed to this report.
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