Profits shrink in Q4 as retailers spend more to meet growing e-commerce demand over the busy holiday shopping season.

After Walmart Inc., No. 3 in the Internet Retailer 2017 Top 500, reported last week that stockouts caused a dip in profitability during the holiday season, other big retailers with physical and online stores are showing the same stresses in competing with Amazon.com Inc. (No. 1). Target Corp. (No. 20) reported its lowest profits in 20 years as rising e-commerce sales meant fulfillment investments needed to be made. Urban Outfitters Inc. (No. 40) also paid for more expedited shipping to meet delivery guarantees for holiday shoppers.

  • Costco Wholesale Corp. (No. 9) reported a 29% year-over-year rise in quarterly e-commerce sales for its second quarter, with conversion rates and traffic both up, according to a CFO Richard Galanti on a call with investors. Due to the shift in the calendar, Black Friday sales were counted in the first quarter this year, as opposed to the second quarter last year, which slowed e-commerce growth by as much as 8%, Galanti said. Costco’s e-commerce sales are up 35% for the fiscal year.
  • Target spent more on online orders to keep up with Amazon, putting margins at their lowest level in 20 years. Stores fulfilled more than half of online orders. With web sales rising another 29% this year to $3.7 billion, Target is investing more to improve fulfillment.
  • Urban Outfitters had double-digit online growth in 2017, but that came at the expense of the bottom line as income fell 50%. It doesn’t break out exact e-commerce sales, but Internet Retailer estimates it reached $1.7 billion in online revenue. The company pointed to a rise in delivery and logistics expenses in its press release as penetration of online sales increased. Urban Outfitters also increased higher-cost expedited shipments to meet holiday demands. Overall, the company’s cost of sales rose 6% while total revenues only went up 2%.  
  • Abercrombie & Fitch Co. (No. 61) reported record online sales across its brands, with direct sales accounting for 28% of total revenue. That puts its total online revenue at $978 million, Internet Retailer estimates. However, the company that was once a staple in malls across the country has continued to reduce its number of stores this year. On the earnings call, CEO Fran Horowitz-Bonadies said that closing stores isn’t resulting in localized bumps to online sales. Instead, the company sees stronger online sales when it opens or revamps its physical locations. Abercrombie plans to leverage increased customer data from its new loyalty program to better convert customers to its digital channels in areas where stores close in the future.
  • American Eagle Outfitters Inc. (No. 67) reported a 20% rise in e-commerce sales in the fourth quarter, the twelfth consecutive quarter of double-digit online sales growth for the apparel retailer. It didn’t announce an exact number for the quarter. The company closed out the year with $1 billion in e-commerce revenue, CEO Jay Schottenstein said in a call with investors according to a transcript from Seeking Alpha. Schottenstein pegged the growth to strong performance and no operational hiccups over the holiday season.
  • The Kroger Co. (No. 88) grew online sales 90% in 2017, the grocer announced today. That puts the chain at $1 billion in online sales for the year according to Internet Retailer estimates. The growth was helped in part by expanding its ClickList, a program allowing customers to buy online and pick up in store, to now cover more than 1,000 of its 2,800 locations. However, the company failed to close a deal on Boxed Wholesale (No. 326), with the startup’s board voting down a $400 million offer.