Although Walmart is an old-school retailer, it is not afraid to learn new tricks and to shift its thinking. This youthful and innovative approach has helped it deliver another solid set of results in a highly competitive market.
The overall net revenue gain of 1.4% may not sound stellar, but for a company of the size of Walmart, this is a significant uplift in dollar terms. At Walmart U.S., the 2.9% increase in net sales equates to an additional $2.1 billion taken over the first quarter -- an impressive achievement given 2016 included an extra day of trading from the leap year. From an already high base, Walmart is now winning market share across many categories.
There is some benefit to the numbers from Walmart's recent acquisitions, but with underlying sales also rising at a reasonable clip, these are the icing on the cake rather than the sole reason for Walmart's growth. Within Walmart U.S., comparable sales increased by 1.4% - an encouraging outcome given much of the increase was down to strong uplifts in traffic. In our view, Walmart's investments in price, its focus on service in stores, and its omnichannel push are all paying dividends. The delay in tax refunds, which resulted in lower sales of higher ticket merchandise over the early part of the quarter, put a small dent in growth, but not by enough to cause serious concern.
Looking in more detail at the various strands of Walmart's initiatives, a sharper focus on price is cutting through -- especially on grocery. From our data, Walmart is winning back some -- but by no means all -- customers from dollar stores. It is also picking up some customers from mainstream grocers. The response to Walmart flexing its price muscles has been good, and we expect further small gains over the rest of this year. A more disciplined focus on low prices is also important as Aldi, and now Lidl, expand into the market.
That said, we believe the threat of the two chains - especially to players like Walmart -- is overstated. There are aspects of the deep discounters such as limited range, smaller stores, and a relative lack of national brands -- that is off-putting for many U.S. consumers. Our data also show that, in some markets, the price differences between the discounters and others are wildly exaggerated. In our view, this means Walmart is unlikely to need to respond much more aggressively than it already has.
While stores are working, Walmart's e-commerce business is in the ascendancy. Gross merchandise value for the online businesses rose by 69% over the prior year. Although this includes the contribution from the acquired businesses, it nonetheless shows that Walmart is growing its digital market share at a significant pace. Positive changes to free shipping requirements and the addition of millions of more products to the online store have both resulted in steady uplifts in customer numbers.
We are particularly pleased that Walmart is using discounting to encourage online shoppers to use more economical store pickup rather than delivery. We see the effective use of its real estate assets as one of Walmart's major strengths over Amazon.
All these initiatives necessitate higher levels of investment and, indeed, within the U.S. business operating expenses as a percentage of net sales increased by 14 basis points over the prior year. However, we are very encouraged that this was offset by strong sales, resulting in the first increase in U.S. operating income for three years.
While the home market continues to power ahead, Walmart's international operations remain patchy. Overall performance is sound, but weaknesses persist in the U.K. where Asda continues to lose ground. There is a sense that Walmart is getting to grips with some of the issues, but we believe it will be some time before all parts of international make a solid contribution.
Overall, this is an encouraging start to the year for Walmart. In our view, the business has not only the strength to hold its own, but to take on the likes of Amazon and new value players. This is one U.S. retailer that is ahead of the curve in responding to the evolving landscape.