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4 Things Walmart's CEO Wants Investors to Know

By Daniel B. Kline - Aug 25, 2018 at 11:47AM

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The company continues to evolve its business as the market changes.

When Walmart (WMT -2.74%) reports quarterly earnings, investors appear to value two numbers over all others: same-store sales in the United States and e-commerce increases. That's largely because the company has invested heavily in its digital business, and the investment community wants to see if that's paying off without hurting in-store sales.

In the company's second quarter, overall revenue climbed by 3.6%. Most importantly, same-store U.S. sales were up by 4.5% -- the most in a decade, according to CEO Doug McMillon -- and e-commerce rose by 40%.

The digital sales number might be the most encouraging since the company saw its shares dip after it reported "only" 23% digital growth in Q1. McMillon was clearly happy with the numbers, and the company released remarks from him after Q2 earnings were reported. His comments highlighted what his chain's next steps would be.

A Walmart pickup tower.

Walmart has been adding Pickup Towers in more stores. Image source: Walmart.

1. Deliver convenience

Walmart has been working on enhancing the in-store shopping experience in conjunction with its digital improvements. McMillon explained the thinking behind those changes in his comments:

Make every day easier for busy families -- our focus here is not just to save our customers money, but to save them time, too. ... We're working to make shopping with us easy, fast, friendly and fun. I'm encouraged by the amount of innovation we're seeing from associates from all over the company. We're seeing an increase in new ideas and more speed in making them happen.

2. Spend well

Just because the retailer has money to invest does not mean it will be throwing cash around. Instead, McMillon made it clear that every dollar is valued.

"Operate with discipline -- we can't afford to have waste in our system and we have to use our capital efficiently," he said. "We're focused on productivity and we're testing or scaling new automation efforts in several areas. Our mindset and specific plans and actions around cost management are vital."

3. Make smart acquisitions

Walmart is not resting on its success. The company continues to make moves around the world to enhance its position. That includes buying a majority stake in Flipkart, and other moves are underway.

"We continue to work through the approval process regarding the proposed combination of Asda with Sainsbury's in the U.K.," the CEO said. "We were pleased to gain regulatory approval in Brazil and closed the sale of 80% of that business earlier this month."

4. Omnichannel is key

While stores and digital are in some ways separate businesses, Walmart has been working to blur the line between the two. Embracing an omnichannel model means the company will continue to expand ways that customers can shop, order, and pick up or have items delivered.

We're leaning into automated pickup towers for general merchandise. ... Two years ago, we had no pickup towers and by the end of this year, we'll have more than 700. We're serving more grocery pickup and delivery customers and now have more than 1,800 locations with grocery pickup. We're also making good progress on activating grocery delivery to cover 40% of the U.S. population by year end.
-- McMillon

Continuous improvement

Walmart operates in multiple markets in which rivals are continuously evolving their businesses. That means the retailer has to keep pushing forward, and it's clear McMillon understands this. The company has been aggressive when it comes to testing a concept and then killing it or rolling it out on a wider basis based on how it performs.

That type of thinking and a willingness to keep evolving should help Walmart maintain its position. There may be bumps in the road -- that's to be expected in a period of market change -- but McMillon has built systems that allow his company to keep changing as customers demand.

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