Greg Foran has been at the helm of Wal-Mart U.S. all of two months, but he's already delving into the problems that plague Wal-Mart Stores Inc.'s largest operating segment -- stagnant sales growth and dwindling foot traffic in stores.
Net sales for Wal-Mart in the United States were up just 2.3 percent, or $3.2 billion, in the first half of the current fiscal year with same-store sales -- revenue from stores open more than a year -- remaining flat.
Speaking last week at a large gathering of U.S. and foreign analysts in Rogers, Foran said he had engaged in a thorough "diagnostics review" of the retailer's domestic operations, paying particular attention to store conditions and customer service. He said he has been visiting stores around the country. So has Wal-Mart President and Chief Executive Officer Doug McMillon.
"It's good for me to see what's happening in stores," Foran said. Some visits were announced; others were not. Behind that, the "secret shopper" program will be the eyes and ears of management, "to get the army that is Wal-Mart to march," he said. The undercover initiative is intended to reward workers who give over-the-top service.
The analyst meeting was Foran's first public speaking engagement with his new job title. He replaced Bill Simon, who is transitioning out of the company. Foran was most recently head of Wal-Mart Asia. He is now in charge of more than 4,000 stores and 1.2 million U.S. employees.
McMillon has talked a lot since the retailer's Shareholders Meeting in June about every Wal-Mart worker acting as a "merchant" for the company. "We're merchants first," McMillon has said.
Foran highlighted many "moments of truth," or key turning points in which customers decide where and how they'll shop. Ease of parking, finding a properly working shopping cart, shoppers' first impressions in stores, inventory selection, seasonality, price and fast checkout -- they're all sensory points that affect the customer experience, he said.
"After 35 years, I found when you get those things right in your stores, then you'll get positive comps," he said. "Comps," or comparable store sales, is an industry term for same-store sales.
The U.S. leader is pushing to make sure re-stocking is appropriately run and organized to tighten inventories, keep costs in-line and improve its fresh offerings. A factoid from the executive who calls himself "the fresh-food guy": Loyal Wal-Mart customers devote 40 percent of their weekly grocery allowance to fresh items.
The retailer has already moved the needle toward better in-stock. The tick has been slight, "not enough to be noticed," Foran said.
Having the right kind of store in the right locations is another pillar for lifting sales. The company expects to open 60 to 70 of its big-box Supercenters, including conversions and relocations, in fiscal 2016 -- down from 120 in the current fiscal 2015 and 130 in fiscal 2014. The mostly grocery Neighborhood Markets are the retailer's golden child now, with year-over-year, same-store sales rising 4 percent or more. Supercenters are, on average, about 180,000 square feet; markets are about 40,000 square feet.
Some 180 to 200 new Neighborhood Markets are planned for fiscal 2016, along with the re-branding of its 12,000-square-foot Express stores to Neighborhood Markets. About 70 Express stores -- still in testing -- were set to open this year, and 20 are planned for fiscal 2016, but none are planned after that. Along with the re-branding of Express, the smaller stores will begin to carry fewer housewares and general merchandise and more fresh foods and consumables.
While capital expenditures may be obvious to the Wal-Mart shopper, Foran sees a need to "do things that our customers haven't even thought of yet." He identified those priority actions as "urgent agenda items," though he failed to give specifics and promised to talk more about the actions toward the end of the fiscal year.
Financial services firm Raymond James was represented at the analyst meeting by Budd Bugatch, who follows the retailer closely. In a recap of the meeting, the firm said Foran's view for the U.S. business can be summed up in two points: focus on quality, not quantity, and optimize the store format.
"We were impressed by Foran's discussion about customers' 'moments of truth,'" Bugatch said in a research note. "To wit, if there were some techniques that the company could use to improve customers' perceived and actual experiences for mid-week shops at Supercenters, this could represent a truly big win-win for the company and its stakeholders."
Foran got his start in retail as a night stocker at New Zealand's Woolsworths -- not to be confused with the American Woolworth -- at age 15. By 19, he was running his own store. He spent the majority of his career in Australia before joining Wal-Mart three years ago. He was also president and CEO of Wal-Mart China before being promoted to president and CEO of Wal-Mart Asia earlier this year.
Business on 10/21/2014