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Walmart is disappointed with one of its fastest growing businesses

Sam Ro
Managing Editor

When you're as competitive as Walmart (WMT), 7% growth just isn't good enough.

On Thursday, Walmart announced sales and earnings that beat expectations. This was driven by a better-than-expected 1.0% gain in Walmart's US comparable store sales. Traders and investors are celebrating by sending shares up by around 8% from Wednesday's closing price.

But in this era of Amazon.com (AMZN) and online retail, management is focused beyond brick-and-mortar and scrutinizing the company's e-commerce business.

Walmart's e-commerce sales grew by 7% during the quarter with a 7.5% increase in gross merchandise volume.

"Growth here is too slow," CEO Doug McMillon said.

"The US number is better than the global number but neither is as high as we'd like," he continued. "We can see progress against several of the necessary capabilities we need to win in e-commerce but we're still working on a few others. We need them all to come together to see stronger growth."

McMillon is right to be worried. In recent weeks, America's most popular brick-and-mortar retailers reported sales flops as cheap and convenient online competition has been stealing business.

Walmart CFO Brett Biggs affirmed that the e-commerce business was "not as strong as we wanted."

One of the bigger challenges for Walmart is perception. Indeed, its supercenters sell almost everything imaginable. So, why do shoppers continue to favor Amazon.com over Walmart.com?

"[O]ur marketplace is ramping up but it takes time to build the assortment to the point where customers realize the depth of assortment," McMillon added. "We now offer more than 10 million SKUs on Walmart.com and we are growing that number through a combination of first-party and third-party items."

"It makes sense that perception will trail reality and we'll work on both during the course of this year."

Sam Ro is managing editor at Yahoo Finance.

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