Wal-Mart CEO vows changes after weak outlook
Doug McMillon, who took the helm on Feb. 1, signals plans to shake things up a bit.
By Andria Cheng, MarketWatch
Wal-Mart Stores' new chief executive Doug McMillon, in his first earnings call since taking the helm of the world's largest retailer on Feb. 1, said he'll accelerate openings of its better-performing smaller-format stores and signaled other changes to come as the company issued another disappointing outlook for the first quarter and for the year.
Any possible changes will be closely watched as Wal-Mart's (WMT) quarterly same-store sales at its namesake U.S. unit, the bulk of its business and a key investor focus, dropped for a fourth straight quarter.
Wal-Mart blamed a shorter holiday season, winter storms that led to closings of over 200 stores companywide and a cut in food stamp benefits that led to a decline even in its traditionally strong grocery business. Wal-Mart shares dropped almost 2 percent in midday trading.
The company said continued winter storms have led to a sales decline so far this month and that the global retail landscape remains challenging, hurt by low inflation, relatively high unemployment and "fragile" consumer confidence.
The retailer also expects increased health-care costs because it's seen increased enrollment from employees that see its plans as better options than what's available in the market," Wal-Mart U.S. chief Bill Simon told reporters on a conference call.
"Wal-Mart has a long history of embracing change," McMillon said on a separate, pre-recorded call, on which he promised to improve Wal-Mart's "customer relevance."
"This year, we'll certainly make some changes to improve our business. Customers' shopping habits are changing more rapidly than ever before. We must be more nimble and flexible as we operate our businesses to adapt to these changes," McMillon said.
Some analysts said Mike Duke, McMillon's his predecessor, tended to place heavier emphasis on productivity and expense controls.
Wal-Mart plans to double openings of its Neighborhood Markets and Wal-Mart Express, to 270 to 300 in the U.S. this year. That's because as Wal-Mart U.S. comparable sales dipped as a whole, while Neighborhood Markets saw 5 percent growth. The smaller-format Express on a comparable basis also saw gains in the mid-single digit to double-digit percentage. While the company's supercenter traffic has been hurt by consumers' not making the mid-week fill-in trips, those smaller stores have seen increased fill-in purchases, Simon said.
Wal-Mart "has mostly ceded the small-basket shopping trip -- the fastest-growing trip mission -- to other competitors, and is only belatedly making attempts to capture this market," said Customer Growth Partners' Craig Johnson.
Simon, in response to a question from MarketWatch, said he doesn't see acquisitions as an option to expand growth in the area as Wal-Mart plans to outfit its locations with gas stations, and fresh and frozen food. It had 346 Neighborhood Markets and 20 Express stores at year end. Credit Suisse (CSGKF) analyst Michael Exstein on Wednesday suggested the company should buy Family Dollar (FDO) to expand its smaller-format growth.
"Our stores from the location and physical footprint perspective aren't exactly what we see in those dollar chains," Simon told MarketWatch. "Express does four times what a typical dollar store does while Neighborhood Market does six to seven times. It's hard to find something that works with (Wal-Mart's) format."
McMillon, meanwhile, also promised continued investments on the online and mobile front and leveraging Wal-Mart's physical stores to generate growth. Online sales last year rose 30 percent to more than $10 billion, though it still pales against the retailer's total sales of $473 billion. One area Walmart may be eying more closely: online grocery delivery. The company said its grocery delivery test expansion to Denver in October has gotten a great response.
However, one change investors may not see from McMillon is the company's continued "price investment." Wall Street has questioned whether the industry should change its profit-eroding aggressive holiday promotional strategy after disappointing sales from Wal-Mart to its rivals Amazon (AMZN) and Best Buy (BBY).
"We invested in price" during the holidays, Simon said. "We grew market share. We are focused on taking care of customers and building market share."
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Hmmm let's see.... How about paying your employees a decent wage then maybe they will actually care and take pride in their work. You might also try selling things are NOT CHINESE JUNK.
You're GREEDY top heavy management just isn't that smart
Wal-Mart has absolutely no idea who they are: They're Target, Kroger,Costco,Home Depot, Best Buy and they're terrible at all of it.
It's not enough to just have the lowest price. Electronics, Automotive and Hardware/Paint require knowledge on the floor. Clothing and Food require knowledge in the executive suites then its proper execution on the floor.
No one, from the executive offices to the employee on the floor has any idea what to stock, how to sell it, or how their products operate.
They want to be Targets cheap but stylish clothing option,Krogers food staples choice( Milk,Meat, Bread, Cereal),Costco's volume value,Home Depot's Garden and Outdoor center(with some paint and hardware) and Best Buys Flat screen television option with some cells plans. And a little Pep Boys Automotive and Sports Authority thrown in because we had the space....and we know you use that stuff also.
WALMART SUCKS. THEY WILL ALWAYS SUCK. I DONT MIND PAYING MORE TO GO TO KROGER'S.
DID I MENTION THAT WALMART SUCKS.
Its a sign of the times...our family is on a fixed income..We dont have the money to spend..
What do you think would happen with the FED printing funny money 7/24...?
Prices will increase on All things...and folks will spend Less shopping..
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