FAYETTEVILLE, Ark. – Wal-Mart’s CEO urged employees on Friday to reimagine its future in a fast-shifting retail landscape.
The company is at a crossroads, as its long-held dominance in pricing has been chipped away at by Amazon and dollar stores. But it’s fighting back on multiple fronts, growing more aggressive with prices and going after Amazon, both online and on the doorstep, by expanding delivery services.
“We want to make every day easier for busy families. We’re connecting all the parts of Wal-Mart into one seamless shopping experience with great stores, easy pickup, fast delivery and apps and websites that are simple to use,” Chief Executive Doug McMillon said at the annual shareholders’ meeting.
The event was packed with 14,000 people including nearly 6,000 Wal-Mart workers as well as shareholders, analysts and several Walton family members. The legacy of the company’s late founder Sam Walton still resonates, with executives paying homage to his philosophy of low prices and customer service. Part business meeting, part pep rally, the meeting was hosted by comedian James Corden and featured musicians including Nick Jonas, Maxwell and Andy Grammer.
Entertainment aside, Wal-Mart emphasized ways in which it’s working to be more nimble.
The company is spending money on its stores and its staff. It’s in the second year of a $2.7 billion investment in training and higher wages, with the goal of making Wal-Mart a place people want to be.
Changes have been painful at times. The company announced this year it would shutter 269 stores worldwide, about half of them in the U.S. That’s a tiny fraction of its locations worldwide, but was a rare pruning for Wal-Mart, particularly on its home turf.
Yet those manoeuvrs to spruce up stores and increase wages appear to be paying off.
The company posted its seventh consecutive quarter of rising comparable-store sales at U.S. Wal-Mart locations, which account for 62 per cent of annual revenue. It expects sales to grow again this quarter. Traffic counts are up for the sixth straight quarter.
Amid a disastrous quarter for many retailers as a whole, Wal-Mart excelled.
But red flags have appeared have as Wal-Mart digs in to fend off Amazon.com. Overall revenue in the fiscal year ended in January declined slightly to $478.6 billion, excluding revenue from membership fees and other income. That’s the first annual drop since the company went public 45 years ago.
Wal-Mart’s e-commerce growth has slowed dramatically even as it escalates investment there. Global e-commerce sales growth slowed to 7 per cent during the first quarter, a notable downturn from nearly 30 per cent two years ago.
“Domestically, Wal-Mart’s challenge remains unchanged as it attempts to adapt to a changing retail environment in which stores are only ‘part’ of the environment and not ‘only’ the environment,” wrote Credit Suisse analyst Michael Exstein.
Still, Wall Street appears optimistic. Wal-Mart shares are up 16 per cent this year, while the Standard & Poor’s index for multiline retail is up only 2.5 per cent.
Some details on steps Wal-Mart is taking:
— REPRIORITIZING PRICES: Wal-Mart is cutting prices on an array of products over the next few years, though it’s not releasing specifics. Executives said that in the past few years, it hadn’t been as aggressive on prices as it should have been. The company is also bringing back the smiley face in stores and TV ads after a decade, saying nearly 70 per cent of customers still equate the image with savings.
—EXPANDING ONLINE: Wal-Mart is increasing its online options, including groceries. It’s adding 14 new markets for online grocery pickup for about 200 stores in 54 markets. It also plans to test grocery deliveries in Denver and Phoenix using ride-hailing companies Uber and Lyft. That joins a pilot program making the online delivery service Deliv available to Sam’s Club customers in Miami.
Wal-Mart trimmed the delivery time for its free-shipping pilot program to two days from three, and it’s cutting a dollar off the membership price to $49 a year. Amazon membership costs $99, but it comes with many other perks. Wal-Mart is also rolling out its own mobile payment system nationwide.
—SPRUCING UP STORES: Wal-Mart is focusing on improving its fresh produce offerings at its U.S. namesake stores, which drives frequent traffic. It’s also refining its baked goods area and lowering store sight lines to help shoppers navigate. Wal-Mart has said customer scores on satisfaction have improved.
—IMPROVING DISTRIBUTION: Wal-Mart ships goods directly to customers from 80 stores and uses 4,500 stores as pickup points. But it’s also trying to fulfil orders more quickly at distribution centres. It offered a peek at a drone it’s testing that skitters around, taking 30 pictures per second and flagging misplaced items. Wal-Mart says drones let it confirm inventory in about a day or less, rather than taking a month. The technology could be rolled out in the next six to nine months.
At the meeting, shareholders approved a makeover of the board and rejected three proposals. Walton family descendants hold about 50 per cent of shares. The number of board members shrunk from 15 to 12, but still has three Walton family members as directors.
Follow Anne D’Innocenzio at http://www.Twitter.com/adinnocenzio