BENTONVILLE, Ark. – Walmart is using its two-day 2023 Investment Community meeting to provide details of its investment approach.
Company leaders are presenting a roadmap for how investments centered around people and leveraging a state-of-the-art integrated supply chain network are delivering a leading omnichannel experience and driving top-line growth, margin expansion and an improved return on investment.
Walmart is also reiterating its fiscal 2024 first-quarter and full-year guidance as the event gets underway today in Tampa, Fla.
“We are in a unique position to serve our customers and members however they want to shop, which will fuel continued growth,” said Doug McMillon, Walmart president and chief executive officer. “As we grow, we will improve our operating margin through productivity advancements and our category and business mix, and drive returns through operating margin expansion and capital prioritization.”
Earlier this week, Walmart showcased its supply chain innovation at its Brooksville, Fla., regional distribution center, where data, software and robotics are being combined as part of a scaled system of supply chain capabilities.
Automation and state-of-the-art technology have been applied to increase item storage, allowing the distribution center to provide a more consistent, predictable and higher quality delivery service to stores and customers and react more quickly to customer demand.
The facility is part of an extensive reengineering of Walmart’s supply chain to fulfill customer needs with a more intelligent and connected omnichannel network that is enabled by greater use of data, more intelligent software and automation. The outcome improves in-stock, inventory accuracy and flow whether customers shop in stores, pickup, or have a delivery.
Stores operate as a place to shop and as fulfillment centers and delivery stations, the company said. Distribution and fulfillment centers hold a mix of items, allowing Walmart to use its existing assets more flexibly and efficiently for new ways of working.
By the end of fiscal 2026 the company anticipates that about two-thirds of its stores will be serviced by automation, approximately 55% of the fulfillment center volume will move through automated facilities, and unit-cost averages could improve by approximately 20%.
As the changes are implemented across the business, one of the outcomes is roles that require less physical labor but have a higher rate of pay. Over time, the company anticipates increased throughput per person, due to the automation while maintaining or even increasing its number of associates as new roles are created.
“It all starts with our associates,” McMillon said. “We are a people-led, tech-powered omnichannel retailer. As it relates to being people-led, it’s about purpose, values, culture, opportunity and belonging. We serve our associates by creating opportunities. Opportunities that turn jobs into careers. We help bring dignity to work by enabling them to see how they’re serving others, as part of a team, and helping them achieve their potential. And as we serve them, they serve our customers and members well . . . they make the difference.”
Investments drive stronger returns
Walmart expects its growth investments to transform its financial profile, centering on three key building blocks: sales growth from its omnichannel business model; diversifying earnings streams through improved category and business mix; and scaling proven, high-return investments that drive operating leverage and improve incremental operating margins.
“We believe that we have the building blocks in place to help define the next chapter of retail and do so while driving strong growth and shareholder returns,” said John David Rainey, Walmart executive vice president and chief financial officer.
Continued Rainey, “Looking at where we are today, we believe that approximately 4% sales growth, and growing operating income at a faster rate, are still the appropriate targets for our business over the next three to five years. The investments we’ve made have positioned us well and stand to generate steady and sustained growth at higher margins. Achieving our targeted 4% sales growth over the next five years would add more than $130 billion of sales on top of our roughly $600 billion base today.”
Walmart’s multi-year growth outlook assumes all three business segments contribute to its mid-single-digit sales growth target.
The company is strengthening its global omnichannel ecosystem and scaling higher-margin value streams that serve customers and businesses and are natural connectors to its omnichannel retail business. This includes advertising, data, memberships and marketplace, all initiatives that will help deliver a better customer and member experience.
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