Industry News: Walmart CEO Reports Substantial Progress on Key Strategies

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Walmart CEO Mike Duke said that the company is focused on near-term execution to grow comp sales in Walmart U.S., improve returns in Walmart International and leverage expenses for the full year. At the same time, he said the company is making substantial or, in some cases, even “step-change” progress in key areas, including leverage initiatives, capital discipline, e-commerce, compliance, talent recruitment and corporate responsibility.

“We have delivered consistent growth and returns to shareholders for many years, and we will continue to do so,” said Duke. “No matter what environment we’re in — today, a year from now, or five years from now — we are driven to win. And we’re never satisfied at Walmart until we do.”

Focus on Near-Term Execution

Acknowledging the challenging retail environment, Duke said: “We’re in a tough and unpredictable global economy. The competition is also tough. And the holidays are right around the corner — raising the stakes even further on serving customers and delivering on performance. All of this is to say that near-term execution is critical for us.”

Duke started with the priority of growing comp sales at Walmart U.S. He said, “When you go to our stores, you’re going to see fantastic new merchandise, aggressive investments in price through lots of rollbacks and better in-stock levels. We’re focusing on execution to deliver results.”

Duke also discussed returns in Walmart International, saying the company could improve “even in places where we’re already doing well.” Duke said that the division recently assessed its portfolio and made important strategic decisions on current operations. “These actions, combined with capital discipline and e-commerce investments, will deliver a solid framework for future growth and improved returns,” added Duke. “Walmart International is a great business that we are only making stronger.”

Duke then turned to a company-wide goal he set at the annual investors’ meeting two years ago: reducing operating expenses as a percentage of sales by at least 100 basis points over five years. “We made progress on that goal last year, and our goal is to deliver leverage again for this fiscal year,” said Duke.

Substantial Progress in Key Long-Term Areas

Highlighting the long-term areas where the company is making progress, Duke started by saying that investments in leverage initiatives are paying off around the world. For example, the U.S. logistics team is reducing shipping costs and increasing transportation efficiency, a single process initiative is generating significant savings in labor productivity in China, and the company has migrated all but one market in Latin America to its Costa Rican Shared Services Center. Duke added, “We’re driving costs out of our system so we can invest those savings into lower prices for Walmart customers.”

Duke said the company is “much more streamlined in how we make real estate decisions and invest capital.” He highlighted the stronger performance of new stores and progress in bringing down the cost to build, expand and remodel stores.

Duke said he “loved the progress that the company has made in e-commerce over the past year. The biggest opportunity we have is winning the intersection between physical and digital retail around the world. We’ve never been more connected across the company on e-commerce, and our results demonstrate this.” In the first half of the year, Walmart’s e-commerce sales grew 30 percent globally, including a strong performance at Yihaodian in China.

As the company has discussed previously, Walmart has made major investments in compliance over the past year. Its focus has been on better processes and procedures, increased training for associates and strengthening organizational leadership. “This is the right thing to do,” Duke said. “And let me be clear that our progress with compliance makes us a stronger business for the long-term. Compliance is an essential part of our growth strategy.”

Segueing to Walmart’s 2.2 million associates worldwide, Duke highlighted that global associate engagement scores are currently at their highest mark ever, the company has hired more than 16,000 veterans in the U.S. in less than six months, and some of the best talent anywhere is excited about joining Walmart.  “I feel better than ever about our talented associates and the career opportunities we provide at Walmart,” said Duke. “The quality of the leaders we’re recruiting is just incredible.”

Duke also said that he was very pleased with the work the company has done to make a difference on big issues around the world. “We’ve only accelerated in the past year — with our commitments on renewable energy, to reduce certain chemicals in products and to help revitalize manufacturing in the U.S,” said Duke. “We set the pace for how companies take on big issues facing society, and we’ll keep leading because it’s good for our business.”

BLM

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