What's going on?

Wal-Mart�s shares jumped the most in over a year on Tuesday (tweet this), as it issued rosy guidance for future sales and confirmed it�s making strides in the online space.

What does this mean?

Wal-Mart�s online revenues were a key part of the announcement: they are growing at four times the rate of its ecommerce competitors. The company is spending a third of its investment budget on digital initiatives and setting up fewer new physical stores as it ramps up its digital strategy, which seems to be working. Recently, Wal-Mart has made big moves in the digital space like buying ecommerce startup Jet.com and partnering with Google to allow customers to order Wal-Mart products using Google�s AI-assistant.

Why should I care?

The bigger picture: Wal-Mart sees great opportunities in digitizing its large groceries business.


Wal-Mart is America�s largest seller of groceries, and so Amazon�s recent acquisition of Whole Foods was a direct threat to its business. Seemingly in response, Wal-Mart is roughly doubling the number of physical sites that help fulfill online grocery orders. Only a very small percentage of US groceries are currently bought online, but online sales are growing seven times faster than sales in physical stores. Wal-Mart is positioning itself to benefit from that shift.

For the stock: Wal-Mart shares were up almost 5% on Tuesday, but it wasn�t just its online success.


While Wal-Mart�s digital efforts bode well for its future, the company also announced it would buy back $20 billion of its own shares (that�s a lot, even for a big company like Wal-Mart). By buying its own shares, Wal-Mart naturally pushes up its share price (all else being equal), and investors may have bought the stock yesterday in anticipation of this. This makes it complicated to try to identify the extent to which the price move reflects investors� better expectations for Wal-Mart�s business model, or simply a reaction to the buyback announcement.