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 MSN Money staff Feb 20, 2014 1:45PM

Doug McMillon, incoming President and Chief Executive Officer of Wal-Mart Stores, speaks during a session at the annual meeting of the World Economic Forum. © Denis Balibouse/ReutersBy Andria Cheng, MarketWatch


MarketWatch on MSN MoneyWal-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."


More from MarketWatch

710Comments
Feb 20, 2014 3:21PM
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How about better quality merchandise instead of chinese junk.
Feb 20, 2014 3:40PM
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I hope that Wal-Mart goes under.  They have destroyed so many local business, and the fact that they would blame a reduction in food stamps for profit losses, shows what type of company they are.  They pay their employees crap, bring most of their stock inventory from oversea, and rely on government funded customers for business.  All with the feeling that you may get robbed in the parking lot!   Companies like this are part of the reason why the American economy is not doing well.  They are Scum!
Feb 20, 2014 3:23PM
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How about paying all your employees a decent wage and benefits.
Feb 20, 2014 2:35PM
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how about getting product on the shelfs instead of backroom, most of your stores have more holes on the shelfs then product. you refuse vender loads when they are empty because it was not signed off big deal, empty shelfs don't sell
Feb 20, 2014 3:47PM
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I think the stores are dirty and the produce is never very fresh and the shelves are empty. Plus I decided to shop more local than the bigger stores, give the money to people who really need it and wil put it back into the community
Feb 20, 2014 3:28PM
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McMillon should play Secret Boss for about three years.  Then we'd see some action.  Maybe the Walton family could kick in a couple of billion apiece, each year and improve their employees lives AND really lower prices instead of using tricks to fake it.  P.S.  It wouldn't hurt their lifestyle at all, I think. Am I wrong?
Feb 20, 2014 4:01PM
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How about paying all your full time help a wage that will get them above poverty level so taxpayers don't have to subsidize your company with food stamps for your workers!!!
Feb 20, 2014 4:03PM
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Walmart would blame Flying Monkeys if they could! Anything but the real reasons for poor sales, Cheap low quality merchandise, lousy employee treatment and low wages.
Feb 20, 2014 3:35PM
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Food stamp cuts hurt them. LOL.  Gotta bet they were lobbying hard for an increase in food stamp spending.  Wah, that's what happens when you prey on those that have nothing when they really have nothing you have no business.
Feb 20, 2014 3:54PM
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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

Feb 20, 2014 3:42PM
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The Walton's get richer and the Walmart employees get poorer. Do these spoiled rich off springs of Sam Walton's think they're all going to take that money with them on the way to their graves when they all die off? Not! Why their greedy kids will blow it all. Nuff said.
Feb 20, 2014 3:57PM
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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.

Feb 20, 2014 3:56PM
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this "new"& improved guy can make all the excuses he wants,bottom line is ,long lines, filthy stores,no quality or quantity !! Out dated foods, or they rot the day after you get them home. I stopped at my local super center in Severn Md, just to buy bird seed & deer corn which they never have and a "cheese" my husband likes! Spent $39.99 on a bag of bird seed & sunflower seeds!!! NEVER AGAIN & the line at the 1-person deli was 15 deep! I'm done,will go to Ace hardware or a feed store,and I go to another box store for groceries! What normally runs me $200 at Wal Mart I got for $151.00 at another box store, & it was all fresh ,no lines & shelves full. Another thing with WALMART, IF YOU TRY & USE COUPONS ITS like trying to get a "border pass"!!!!! This is why the store is going ,going, soon to be gone!
Feb 20, 2014 5:04PM
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Wal Mart is reaping what it has sown.They sold cheap junk from China and helped export American jobs overseas. Now the unemployed and underemployed Americans have less income and are buying less.  Hence their stores have less business.  This isn't rocket science.  The basic concept here is that actions have consequences. Of course, you have to be able to look beyond the end of your nose to see the longer range consequences.  With ever so little thought, these consequences were foreseeable.
Feb 20, 2014 4:04PM
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Wal-Mart has learned the art of manipulating manufacturers and suppliers by requiring them to move their manufacturing overseas to facilities they control. This way the manufacturer and supplier loses control of their own processes and basically Wal-Mart has a manufacturing facility they control and is not in their possession. Tupperware has always regretted handing over their sales to Wal-Mart. Toro mowers wouldn't let Wal-Mart do that because Wal-Mart required they build a really cheap mower which isn't part of Toro's business plan. It would also under cut their independent suppliers which is the business plan of Wal-Mart. Wal-Mart has always tried to find ways to cut costs this way. They then transferred this business method to their hourly floor employees. Keep the pay low or cut the hours. Make them work through breaks and fire anyone that complains or files complaints. Now with a White House administration that promotes entitlement Wal-Mart is seeing this as a another source to cut costs at the expense of others. Use new health care, tax, and wage laws to manipulate the burden to the taxpayer to increase the profits of the business along with the huge salaries of the few on the board. This is what happens when government gets too involved in regulating what people and business do and how they live. Take the ACA out of the equation and Wal-Mart and others don't have any incentive to cut pay, cut hours, or increase prices. Wal-Mart will probably not fail completely but it will probably will have to pull back and shrink the business to stay viable. I believe this will be inevitable. This will be bad because as they close stores and/or build smaller stores it will mean fewer workers and more former Wal-Mart property abandoned or sitting around for years waiting for a buyer in a distressed market.
Feb 20, 2014 3:28PM
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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..

Feb 20, 2014 3:35PM
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I remember back in the late 1990s to 20010 Walmart stores would be packed jammed with cars in Southeast Pa, in the last 3 years or so it has not been as busy for some reason at least for the ones I see anyway. Maybe because of all the Target stores going up.
Feb 20, 2014 5:12PM
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walmart blames food stamps while execs make millions...disgusting
Feb 20, 2014 5:42PM
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How about selling products made here in the US, rather than China!
Feb 20, 2014 4:31PM
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Walmart needs to start out by cleaning their dirty, filthy stores up.  After that they can stock the shelves and then work on the employees.  I do not think their slightly lower prices warrant having to wade through a trashy, dirty, Walmart.  It is the very image of coporatism gone bad,  Its disgusting.  F*CK Walmart...   
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