Walmart Inc.’s online sales—which include a large buy online pick up in store (BOPIS) operation for groceries and other goods—are soaring. But profit for the ecommerce operation could be years away, according to industry observers.

In the first and second quarters of Walmart’s current fiscal year, online sales grew 37.0%, the company reported. Management expects growth in ecommerce sales to be at least 35% for the year as a whole. That’s far above the 15.0% overall growth rate for U.S. ecommerce sales in 2018, according to Internet Retailer data.

“The sustained high growth rates are pretty amazing, really,” says Paula Rosenblum, managing partner at research firm Retail Systems Research (RSR).

While Walmart’s online growth is impressive, it has been a drag on profit. Walmart’s online operations have been losing at least $1 billion per year, analysts and media reports say.

A July 8 investors’ note from Simeon Gutman, an analyst with Morgan Stanley & Co. LLC, says the losses are even higher. Walmart’s U.S. ecommerce business could lose about $1.7 billion this year from $1.4 billion in 2018, but will level off after that, Gutman wrote.

Despite the online losses, Morgan Stanley is optimistic about Walmart. The investment bank gives Walmart an “overweight” recommendation, meaning analysts expect investment returns on Walmart stock to exceed those of the overall stock market slightly. Baked into that rating is an assumption that ecommerce losses will start to decline. “Therefore, any indication that [ecommerce] losses are not peaking in 2019 would be a setback to our thesis, which we would evaluate alongside other factors,” the investor note says.

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Included in the full version of this story:

  • Data on the expansion of its BOPIS and same-day delivery capabilities.
  • Why losing money online might not be a bad thing for now.
  • An update on Walmart’s expanding online grocery business. 

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