More Wal-Mart 'fixing' promised

CEO says store overhauls, online bolstering continues

Posted: October 22, 2017 at 2:12 a.m.

In this August photo, Holly Kemp, her son Andrew Kemp, 9, and daughter Noelle Kemp, 2, of Rogers shop for back-to-school supplies at the Wal-Mart Supercenter on Pleasant Crossing Drive in Rogers.

Wal-Mart Stores Inc.'s management team has been busy "fixing" the company's domestic stores the past two years, according to U.S. chief executive officer Greg Foran.

The retailer invested in wages, training and technology to benefit its workforce and increase customer service, improved the quality of items on its shelves, reduced inventory piled up in back rooms and unveiled initiatives to make shopping easier.

"The progress we've made to date has put us in a position to take the next step," Foran said. "So now we must begin moving from a mindset of fixing to a mindset of leading."

Foran outlined examples of what "leading" will involve during the company's annual meeting with the investment community in Bentonville earlier this month. Wal-Mart's strategy to fix its U.S. business has been a key component of 12 consecutive quarters of sales growth. While those elements remain core to the retailer's strategy moving forward, Foran told investors "more needs to be done" as Wal-Mart continues to identify ways to accelerate U.S. sales.

Continuing to run great stores, offering more value for customers and providing convenience by blending online and in-store capabilities are among the solutions. Building trust with consumers remains key as well, particularly in the retailer's fresh foods and perishables offerings.

Foran offered one example of Wal-Mart's idea to build trust during his presentation, saying the company is working with suppliers on a pilot program designed to help move perishables through the supply chain quicker. The result so far has produced an average of two to three additional days of freshness for customers. It's up to four days for strawberries.

"As leaders, we need to push ourselves further on quality," Foran said. "This is especially so in fresh and we have a robust program of work in the pipeline."

Wal-Mart also will continue its efforts to lower prices, according to Foran, which includes negotiating better terms with suppliers and lowering operating costs. Chief Financial Officer Brett Biggs said the company saved about $20 million with changes to its plastic shopping bags and another $7 million by shortening the length of its receipts.

Wal-Mart has devoted more space at the front of its stores to self checkouts and will continue to emphasize services such as online grocery pickup, which is available at 1,000 locations and will roll out to 1,000 more next year. Wal-Mart now has more than 17,000 self-checkout hosts in about 4,200 stores. There are also 18,000 personal shoppers for online grocery.

"These roles foster a one-to-one relationship," Foran said. "They've been made possible by efficiencies from technology."

Brian Yarbrough, a retail analyst with Edward Jones, said it's clear Wal-Mart has a robust plan and its performance the past couple of years is proof the company has done a good job of improving store performance under Foran. It was vital for the company as well because Wal-Mart's U.S. business accounts for about 60 percent of its total revenue.

But Yarbrough said many of those elements to fix stores were "low-hanging fruit." There will be bigger challenges moving forward as Wal-Mart attempts to increase U.S. sales without the benefit of a large number of new-store openings. The retailer plans to open less than 15 supercenters and 10 Neighborhood Markets next year.

"I think it's going to be difficult," Yarbrough said. "These stores are so big. They do such big volume. You have to do a number of things. You have to bring customers back that maybe left you, drive in new customers and then hopefully get your customers that are in there to buy more than they have been. I don't think that's easy."

Ken Perkins, president of Retail Metrics LLC, said one of the most important things the retailer can do is continue to lean into services intended to make shopping between in-store and online seamless.

In addition to its online grocery pickup, Wal-Mart has deployed other initiatives, like putting orange pickup towers in stores and express lanes in its pharmacy, financial services and return departments. Foran said Wal-Mart will "leverage" its stores more to expand its omnichannel offerings. Perkins said those capabilities can win over customers.

"What they need to do in terms of going forward is really tighten up their pick and click operations," Perkins said. "I think those type of things are really important to consumers and can drive traffic into stores. Make it a seamless experience."

Foran is confident Wal-Mart can accomplish it as the retailer moves from fixing its stores to leading in retail. He said the company will continue to build on its successes from the past three years, invest in growth and lean into innovation.

"Doing these things will enable us to deliver the four elements of our plan to win: running great stores, being great merchants, delivering value and providing convenience," Foran said.

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