Every time the New England Patriots lose a game or two early in the season, the questions start. Is Tom Brady done? Will this be the year age catches up with him and everything falls apart?
Those questions have been coming for years, and they will continue until it either happens or Brady walks away. You see the same thing in basketball when the Golden State Warriors drop a few games. People want to interpret that a bad run, or maybe a little boredom, shows a sign that everything is ready to fall apart.
These are doubts borne out of just how great these two teams have been. They're judged by their own standard, held up to scrutiny others simply don't face.
That's what happened to Walmart (NYSE:WMT) when it reported fourth-quarter results. The company had digital sales growth that most companies would be thrilled with, but it was well below Walmart's own recent quarters.
In the first three quarters of the year, Walmart's digital sales grew by 63%, 60%, and 50% year over year. That's impressive growth that suggested the company had made the right decision in spending $3.3 billion to buy Jet.com, putting its CEO, Marc Lore, in charge of the chain's overall digital efforts.
In Q4, however, growth slowed to 23%. CEO Doug McMillon addressed the decline during Walmart's Q4 earnings call: "The majority of this slowdown was expected as we fully lapped the Jet acquisition, as well as created a healthier long-term foundation for holiday. A smaller portion of the slowdown was unexpected as we experienced some operational challenges that negatively impacted growth."
Basically, the company stumbled slightly in a way that McMillon was quick to point out would not be a long-term problem. He said that "we expect e-commerce growth to increase from the fourth quarter level," but that did not mollify shareholders.
Shares closed at $104.78 on Friday, Feb. 16. The company reported results before the market opened on Tuesday, Feb. 20, and shares closed that day at $94.11, a 10% drop. Shares have continued to fall, closing Feb. 28 at $90.01.
Is something wrong?
While digital growth slowed, Walmart posted a 2.6% increase in U.S. same-store sales and a 4.1% increase in overall revenue. Those are strong numbers that suggest customers are buying from the chain and the breakdown of those sales may not matter.
Walmart, led by McMillon and Lore, has built an omnichannel shopping model. Customers can shop in-store, go online, or mix the two. That blurs the line of what counts as a digital sale, because brick-and-mortar supports digital, and vice versa.
And digital sales will continue to grow. The company forecasts a 40% increase in the current fiscal year. The reality, though, is that the health of Walmart can be determined by whether it grows overall sales and revenue. Profit matters less because taking on an online giant like Amazon.com isn't cheap.
Walmart's business is fine
For Walmart, it's not all that important how its shopping mix breaks down. If digital growth slows but in-store sales increase, that would be surprising, but in an omnichannel world, both sides of the business support each other.
There will be bumps in the road. Neither the Patriots nor the Warriors win every game. Walmart has the needle pointed in the right direction with its digital business. The chain's 23% digital growth in Q4 might be a slight disappointment, but 40% growth for the year will be impressive.