Doug McMillon hasn't been shy about his willingness to make changes in his time as chief executive officer at Wal-Mart Stores Inc., leading the retailer through a transformation as it tries to keep pace with the evolving preferences of consumers and online competitors like Amazon.com.
But McMillon, who has been CEO since 2014, told investors gathered Tuesday at the Bank of America Merrill Lynch 2017 Consumer and Retail Technology Conference in New York that there's one thing he's keeping in mind amid the changes he wants to put in place at the Bentonville-based retailer: Don't do too much, too quickly.
"There are so many things you can do to improve this business that one of my biggest challenges is not flooding the engine with ideas," McMillon said. "We've got to also be able to execute."
Under McMillon, Wal-Mart has spent billions on initiatives aimed at helping the retailer reach its goal of delivering seamless shopping for customers in a retail age shaped by mobile devices and technological advancements. McMillon reaffirmed that Wal-Mart believes the omnichannel model -- blending both in-store and online capabilities -- is the winning approach in retail and has actively been implementing ways to better provide customers the opportunity to shop in any way they choose.
Investments have been made in wages and training for employees, cleaning up stores and establishing services like grocery pickup, Wal-Mart Pay and free, two-day shipping. The company has been active on the acquisition front, improving its e-commerce assortment and online capabilities after purchasing Jet.com, ShoeBuy.com and Moosejaw. Wal-Mart has restructured its e-commerce and technology teams, aligned store and e-commerce personnel across its businesses to drive efficiency and continues to introduce technological tools for employees to improve operations.
"We've got to change a lot, and we have a history of changing," McMillon said. "But I think in today's world, it's larger and faster than maybe it was in some past periods."
Wal-Mart believes the efforts are producing results. While net earnings for the fourth quarter of fiscal year 2017 fell 18 percent largely because of its investments in e-commerce and other initiatives, the company reported same-store sales growth of 1.8 percent. Traffic continued to climb in Wal-Mart's U.S. stores as well during a period in which other retailers struggled to get customers through the doors. U.S. e-commerce sales also increased 29 percent in the quarter.
"The strategy is working," Chief Financial Officer Brett Biggs said last week.
Brian Yarbrough, a retail analyst with Edward Jones, believes plenty of questions about long-term results remain. But changes have led to Wal-Mart becoming a completely different company than it was three years ago. Under McMillon, he said Wal-Mart has "done a good job of saying we have to change or we're going to get left behind."
"They're probably on the forefront of everything that's going on in retail," Yarbrough said. "I give them credit for not just sitting still and saying, 'We're just going to let Amazon eat our lunch.' They're moving rapidly and trying a lot of things. Some will work and some won't, that's just the nature of it."
In the past, Wal-Mart has been criticized for responding too slowly to change. But Yarbrough agreed with McMillon's thoughts that the company must remain cautious about changing too much, too quickly.
He pointed to potential insights from the company's recent integration with Jet.com that could be "shoved down the pipeline," but he believes Wal-Mart is likely trying to pace the introduction of new concepts. There are also chances to buy more online retailers, which U.S. e-commerce chief Marc Lore has said the company will consider if it makes "good business sense."
Yarbrough said there are "tons" of opportunities to take the technology available today and apply it to retail as well, but going too fast carries the risk of overwhelming employees.
"I think there's so many options on the technology front and so many things for them to do, that I think [McMillon is] carefully trying to pick through that," Yarbrough said.
It doesn't mean McMillon won't continue to plow new ground, particularly in an e-commerce operation that continues to expand and now offers more than 35 million items for Walmart.com customers. Wal-Mart also has committed to getting those items to consumers quicker as well, offering free two-day shipping on more than 1 million products aided by a beefed up fulfillment network.
"This e-commerce business is not magical," McMillon said. "You can build it. And I think today we understand a lot more than we did in the past about how to do it and really excited about the talent that we have in the company helping us figure that out. So I think we've got a great opportunity.
"The question that I think is kind of on all of our minds is how fast can you scale it and what does that mean to profitability over time?"
That remains to be seen. McMillon told investors Tuesday that "part of winning is generating a return," but added that it doesn't have to be delivered in one quarter.
It's a familiar message from Wal-Mart, which has cautioned investors that profits would be relatively flat in the short term as it invests in e-commerce operations, store remodels and other technological advancements aimed at propelling the company's transformation.
"I'm not trying to say just hang with us and in a decade we'll make money," McMillon said. "I'm not saying that. I'm saying that as you hold us accountable, you'll see progress. But we're not going to be short-sighted. We're going to do what we need to do to build the capabilities to win."
Business on 03/15/2017