Wal-Mart U.S. President and Chief Executive Officer Greg Foran has averaged nearly 15 in-store visits a month since his promotion last August.
Those unannounced drop-ins affirmed what Foran and Wal-Mart Stores Inc. executives suspected. Wal-Mart's nearly 4,500 stores need to be cleaner, better run, more consistently stocked and staffed with more engaged employees.
Foran, Wal-Mart U.S. Chief Operating Officer Judith McKenna and Wal-Mart Chief Financial Officer Charley Holley outlined on Wednesday areas where the company would like to see domestic improvement, and they highlighted key points in a strategy for remedying what ails the world's largest retailer. Investors gathered in New York City for a nearly 90-minute presentation and Q-and-A session with the executives.
"We've got plenty of opportunity, but as I often say to my team, you get one point for talking about it, nine points for doing," Foran said. "We have, as a top priority, to grow sales and market share. That starts with improving the core and concurrently investing for the future."
Foran's 116 visits over the past eight months yielded several areas to improve: customer experience, inventory availability, store layout and design, blending of digital and physical resources, adding merchandise that customers want, pricing and building on the relationship between stores and the company's home office. Foran also pointed to the desire to improve performance from Wal-Mart's gas, financial services and health care offerings.
Getting customers to notice significant changes by the Christmas-shopping season is the company's goal.
Wal-Mart is investing almost $1 billion in employee initiatives, including a wage increase that went into effect Wednesday. Holley reiterated that the retailer is in "investment mode," and the company previously said it will spend up to $1.5 billion on its e-commerce business.
Those actions have earned praise but also led to caution among some investors as Wal-Mart looks to grow its more than $279 billion in U.S. sales. Brian Yarbrough, senior analyst at financial services firm Edward Jones, said Foran was right to note that simply talking about the problems won't guarantee happy shoppers.
Wal-Mart U.S. reported same-store sales improvement of 1.5 percent in the fourth quarter of 2015. It was the highest sales increase in nine quarters.
"Everything he said makes sense and is probably the right plan; I just think the problem is executing on that plan," Yarbrough said. "It's easy to talk about it, but now they have to go out and execute. That's what they haven't been able to do for the past, multiple years. To me there was really nothing I heard today that I was like 'Wow! That's new. These guys are ready to get out there and lead.'"
Wal-Mart hasn't posted consecutive years of same-store sales growth above 2 percent since 2005-06, Yarbrough said. That sort of improvement would need to be seen on a consistent basis in order for investors to consider the plan a success.
Improving employee morale and merchandise availability as a way draw customers back to the stores have been focal points since Wal-Mart Stores Inc. CEO Doug McMillon took over in February 2013. In many ways Wal-Mart is returning to "retailing 101," said Randy Koontz, first vice president of investments for Pinnacle Wealth Management of Raymond James & Associates Inc. in Rogers, said.
"They are obviously committed to improving in-stocks, store appearance and customer service, or the customer experience as they refer to it, in addition to delivering lower prices than their competitors," Koontz said."They seem to have distribution and logistics and a bunch of other high-tech stuff figured out and are focusing on all the low-tech stuff."
Reaping the benefits of that return to basics could take time. When asked how initiatives would impact operating margins, Foran said it would take "probably three to five years" for the plan to be "executed systematically and sensibly."
Investors should be willing to give Foran and others the benefit of the doubt because they have a track record of success in other divisions of the company and bring some new perspective to Wal-Mart U.S., said Stephens Inc. managing director John R. Lawrence . Wal-Mart is acknowledging that low price matters but that it's not the only consideration for shoppers.
"Greg comes in with a clean slate and a fresh set of eyes," Lawrence said. "It is certainly process heavy, but there is a recognition that price doesn't solve every problem."
Foran said the company now has "exactly the right approach" for the long term.
"We're not thinking about this quarter to quarter," Foran said. "We're thinking in a much longer time frame. I can tell you we are 100 percent committed to getting this thing not just right for a year or two but right for a couple of decades."
Business on 04/02/2015