Grocery improvements drive ecommerce gains at the massive retail chain. Plus, Sam's Club grew online sales by 21% for the quarter, with four club stores turned into ecommerce fulfillment centers.

Walmart Inc. posted strong holiday sales for the fourth quarter ending Jan. 31, with ecommerce through Walmart U.S. operations growing 43% during the prior three months compared to the prior year’s fourth quarter. For the full year, the mass merchant’s online sales in the U.S. grew 40%. Walmart, No. 3 in in the Internet Retailer 2018 Top 1000,  didn’t break out exact sales figures or international numbers for ecommerce.

Walmart attributes the ecommerce growth to expanded grocery pickup and delivery, along with more products on Walmart.com. At the end of 2018, the retailer had 1,000 pickup locations for its online grocery orders and almost 800 delivery locations. Walmart was the top-ranked retailer in Internet Retailer’s 2019 Omnichannel Report, with the most omnichannel features and strong execution.

By the end of the next fiscal year, it plans to have 3,100 pickup points and 1,600 delivery locations for its grocery program. However, that expansion comes at a cost, according to Sylvain Perrier, CEO of grocery ecommerce platform Mercatus. Operating income at Walmart rose 7.4% for the year to $22.0 billion, with $11.0 billion spent on capital expenditures like store remodels and ecommerce investments.

“Retailers watching Walmart’s success must understand that its impressive Q4 earnings results were driven in large part by its significant investment in ecommerce,” Perrier says. “This includes various grocery initiatives such as online ordering, BOPIS (buy online, pick up in store) and delivery. However, this didn’t happen overnight for Walmart—it required thoughtful investment, planning and data analysis to ensure a successful execution.”

Walmart CEO Doug McMillon wants to grow the number of repeat buyers at its online stores, including Walmart, Bonobos, Modcloth and others, to help those ecommerce investments pay off. However, Walmart expects losses associated with ecommerce sales to grow next year.

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“Our previous investments in fulfillment centers and systems, plus our acquisitions, are helping us drive strong sales. But we need to make more progress to improve profitability,” McMillon said on an earnings call. “Our fulfillment and shipping costs are improving, and as we continue to enhance our assortment, repeat visits should increase and contribute to improved profitability.”

That larger assortment was improved with some big new marketplace additions last year. Fanatics Inc. (No. 29) and Lord & Taylor (owned by Hudson’s Bay, No. 36) are among the retailers that launched shops on Walmart’s marketplace. And Walmart-owned Jet.com added stores for Apple Inc. (No. 2) and Nike Inc. (No 27).

Walmart also added new names to it portfolio of online retailers this year, with the acquisition of plus-size apparel brand Eloquii, and launched its own digitally native mattress brand Allswell. It also acquired intimates brand Bare Necessities (No. 303), which it will eventually integrate into its Walmart.com and Jet.com catalog in addition to maintaining a standalone site for the brand.

Sam’s Club, Walmart’s warehouse club, grew ecommerce revenue 21% for the quarter and 27% for the year. Last year, the members-only retailer launched free shipping for it’s top-tier members and began using Instacart for last-mile deliveries from retail locations. It also closed 63 stores across the country, with plans to turn 10 of them into ecommerce distribution centers. However, only four made the transition by the end of the fiscal year.

Internationally, Walmart paid $16 billion for Indian retailer Flipkart. McMillon briefly mentioned that India’s regulatory environment has proven challenging but didn’t disclose any changes as a result of India’s new, more stringent ecommerce regulations.

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The retail giant also leveraged its store base in Mexico to increase availability of same-day delivery in the country, adding 5,000 items to that service. In addition, it launched its first ecommerce store in Japan with the Walmart Rakuten Ichiba Store.

For the year, Walmart’s total revenue rose 2.8% to $514.4 billion, up from $500.3 billion last year.

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