By Paul Page 

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Walmart Inc. is rethinking its online strategy after seeing the tough logistics behind e-commerce weigh on sales and profits. The world's biggest retailer says holiday goods crowded out space for everyday items at its warehouses and stores, leading to stock-outs and slower online sales growth in the key fourth quarter. The results, including a 28% slide in operating profit, mark a disappointment for a business that has spent billions building up online capabilities, the WSJ's Sarah Nassauer reports, and show how retailers are struggling to challenge Amazon.com Inc.'s relentless growth. Walmart's online sales rose 23% year-over-year growth during the holiday quarter, behind its own earlier growth and Amazon's expansion. Perhaps more important, overall profit margins were hurt by growth in less-profitable online sales -- a key economic quandary that continues to trouble retailers. Walmart now will stress its main web presence for customers over the Jet.com operation it acquired, and will go back to trying get the right goods in the right place at the right time.

Albertsons Cos. believes the first step to holding back Amazon is to get bigger. The supermarket chain plans to buy the share of drugstore operator Rite Aid Corp. that isn't being sold to Walgreens Boots Alliance Inc., the WSJ's Heather Haddon reports, a new step in the increasingly frantic consolidation underway as retailers respond to changing consumer shopping patterns. The transaction would create a company with revenue of $83 billion, and around 4,900 stores and 4,300 pharmacies across 38 states. Grocery stores and pharmaceutical sellers have been especially active lately in adjusting to broad changes in the business, shifts Albertsons' executives say put a greater premium than ever on scale. Albertsons has made several technology plays as sales in physical stores have softened, including last year's acquisition of the Plated meal-kit service. Combining the food and drugstore business, the company chief executives say, is the best way to respond both to Amazon and an increasingly aggressive Walmart.

The robots are coming for the world's low-cost knitters. Garment factories across Bangladesh have been bringing in automated cutting, stitching and knitting machines in a bid to hold onto their place in global supply chains, a trend that's rolling across the apparel business as retailers push to keep consumer costs down and suppliers respond by cutting costs that already seem impossibly low. The WSJ's Jon Emont writes labor costs in some developing countries have been rising, however, pushing companies to turn to technology like "sewbots" in a drive that is upending the economics of the apparel industry and potentially threatens social fabrics in developing nations. A crucial part of the supply chain -- production of basic textiles -- is seeing an outright decline in jobs even as apparel production in Bangladesh surges. Garment exports rose by 19.5% from 2013 to mid-2016, expanding the country's essential role in garment trade while proving that even low-wage workers are vulnerable to automation.

SUPPLY CHAIN STRATEGIES

DHL said in announcing an ambitious new contract in the U.K. with KFC last year that the deal would "set a new benchmark," but this wasn't what the company had envisioned. Soon after taking over the fast-food chain's deliveries along with logistics partner QSL, media around the world are reporting on a "KFC crisis" after the unit of Yum! Brands Inc. closed more than half its U.K. stores because they'd run out of chicken. One local police office even pleaded with residents to not call the station "if your favourite eatery is not serving the menu you desire." It's a nightmare for the logistics operators, and a sign of the difficulty in pulling off big changes in a supply chain operation in a single swoop -- particularly in a far-flung network with some 900 sites facing consumers. DHL is apologizing as the company and QSL scramble to get the chicken shops open. At that point, they'll try to figure out what got such a basic distribution operation so deeply fried.

QUOTABLE

IN OTHER NEWS

Eurozone consumer confidence fell in February, a tentative sign the currency area's economic recovery may have leveled off. (WSJ)

BP PLC says global demand for crude oil could peak in the next two decades as renewables take a greater share of the world's energy needs. (WSJ)

Israel-based Delek Drilling LP and Houston's Noble Energy Inc. will supply an Egyptian company with natural gas valued at $15 billion. (WSJ)

Qualcomm Inc. raised its bid for NXP Semiconductors NV as the chip maker seeks to fend off a hostile takeover approach by Broadcom Ltd. (WSJ)

Unilever PLC as part of its sustainable sourcing plan will publicly disclose the suppliers and mills that provide its products. (Supply Chain Digital)

Prime Shipping Foundation, a partnership between Quorum Capital Ltd. and ship broker Interchart LLC, is seeking $150 million to launch its own cryptocurrency. (Bloomberg)

Standard & Poor's parent S&P Global is acquiring trade-data specialist Panjiva Inc. (American Shipper)

Thailand's auto makers are fighting a proposal to cut import tariffs on cars. (Nikkei Asian Weekly)

AP Moller-Maersk says bulk and tanker operations acquired with Germany's Hamburg Süd won't become part of the Danish group's core shipping business. (Lloyd's List)

Opponents of a planned $500 million rail yard near the Port of Long Beach are asking California's Supreme Court to halt the project. (Press-Telegram)

European road freight rates soared to their highest point in more than a decade in the fourth quarter despite a 6% gain in capacity. (Lloyd's Loading List)

China's Wuhan Han'ou International Logistics Co. expects 30% growth this year in freight rail services to and from Europe. (RailFreight.com)

Developers expect to open a 64-acre logistics facility next to Mexico's Tijuana International Airport next month. (Voice of San Diego)

Southwest Airlines will start handling international cargo shipments in May, starting with traffic to and from Mexico. (Air Cargo News)

The New York Shipping Exchange added supply-chain executives from Electrolux AB and Nestle SA to its board of directors. (Journal of Commerce)

New Zealand barred entry to three cargo ships carrying automobiles from Japan because the vessels were infested with "stink bugs." (CNN)

ABOUT US

Paul Page is deputy editor of WSJ Logistics Report. Follow him at @PaulPage, and follow the entire WSJ Logistics Report team: @brianjbaskin , @jensmithWSJ and @EEPhillips_WSJ. Follow the WSJ Logistics Report on Twitter at @WSJLogistics.

Write to Paul Page at paul.page@wsj.com

 

(END) Dow Jones Newswires

February 21, 2018 04:50 ET (09:50 GMT)

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