Sam’s Club CEO aims to grow sales ahead of retailer’s 35th birthday

John Furner took over as Sam’s Club CEO on Feb. 1 this year, and brought with him two decades of retail operations experience from working his way up through the ranks.

Wal-Mart Stores Inc. has been the only job Furner has had since he applied to the retailer for an hourly job while attending college at the University of Arkansas in Fayetteville. Furner said he needed a job and had some extra time on his hands in 1993 when his rock band split up. That’s when he applied to Wal-Mart for a part-time job, in part because his dad worked there.

“Some 23-plus years, 16 or 17 jobs and three countries later, I feel like I’ve learned the business of Walmart U.S., Sam’s Club and Walmart International from the bottom up,” Furner said in an internal communications blog earlier this year.

Retail insiders told Talk Business & Politics-Northwest Arkansas Business Journal in early 2016 Furner would likely be the next CEO of Sam’s Club when the time was right. He was promoted to CEO this past January after Rosalind Brewer announced her departure.

Furner declined an interview with Talk Business & Politics-Northwest Arkansas Business Journal for this story, and denied media access to hear him speak recently at the University of Arkansas. Furner’s management team did provide comments via e-mail.

WORK IN PROGRESS
Early on, Furner admitted there was work to do in simplifying the business and changing the mindset. He outlined three areas of focus from day one —people, product and digital capabilities. In October, Furner told the Wall Street investment community he understood their questions about whether his new leadership team will be able to move the needle in a positive way.

“We are moving with speed and along the way, we’ll show you the progress through results,” Furner said.

Through three quarters of this year, sales metrics have improved over what had been a lackluster performance for the past few years. Year-to-date comparable sales growth rose 1.9% (excluding fuel). Overall sales rose 2.2% to $40.218 billion while operating income fell 5.8% to $1.171 billion.

Sam’s Club in the recent quarter had some of its best sales metrics in several years, with total revenue of $13.584 billion (excluding fuel) up 3.2% from the year-ago period and comp sales rose 2.8% without fuel and 4% including fuel. Membership income, which is important for Sam’s Club, improved 0.9% in the quarter compared to 0.2% a year ago.

MANAGEMENT PLAYBOOK
Furner said Sam’s Club must improve its competitive position, and he believes e-commerce is going to help. Online sales were up 27% through the first half of this year. He said club traffic is growing and scan-and-go usage has doubled this year, generating more than $1 billion in sales since it was launched.

Jamie Iannone, CEO of SamsClub.com, said the focus has been on “reducing friction for our members, whether that’s by saving them time through scan-and-go, offering easy reorder on the app, or reinventing the membership sign-up process.”

“We’re using technology to make Sam’s Club an even better place to shop and a better place work, he said. “We think about SamsClub.com as an extension of the club experience. It’s an expanded assortment but it’s not limitless. We want to offer a curated assortment of great items at an incredible value, and you know a talented merchant has done the hard work for you. You know that everything we offer was thoughtfully picked for you.”

Budd Bugatch, an analyst with Raymond James & Associates, said Sam’s Club had long been an underachiever. He approves of Furner’s focus on people, product and digital. He said Furner is a merchant at heart and he believes that will make a difference. Tim Campbell, an analyst with Kantar Retail, said Sam’s Club was already beginning to turn the tide when Furner was named CEO. He said much of the early fruit gathered under Furner’s watch was planted by Brewer. Campbell said Furner is making some improvements in Sam’s inventory.

“He’s good at execution and he’s done a good job rationalizing the SKU [item] count around the club,” Campbell said. “We’ll see more in the next couple of quarters from Furner’s agenda.”

Gisel Ruiz, chief operations officer at Sam’s Club, said traffic continued to improve every quarter of this year.

“With more members coming through our clubs each week, our role as operators is to make sure they have a consistently great experience,” Ruiz added. “We’re proud that member satisfaction scores in areas like speed of checkout continue to rise. We want our members to shop with us in whatever way is convenient for them.”

Campbell said the club segment is not immune to the retail competition, but it’s faring better than some segments like specialty retail. He said the value play at clubs is hard to beat. He said Furner asking for an e-commerce CEO that only serves Sam’s Club was a smart move because Sam’s Club hasn’t always received the resources from its parent Wal-Mart Stores.

SAM’S ORIGINS
Andy Wilson, a retired Wal-Mart executive, recalls the early days of Sam’s Club when in every Friday management meeting Sam Walton would say “we are a merchandise driven company. He told us over and over again merchandise was what we did and we all must be merchant first.

“He would look out at management and say he didn’t care if they were a lawyer, but they have to be a merchant first,” Wilson said.

Sam’s Club will celebrate its 35th birthday in 2018, and much has changed in retail. Sam’s Club isn’t immune to that transformation, Wilson said. He said early on, Sam’s Club was set up in somewhat isolation of Wal-Mart.

“Sam’s was a wholesale business and Wal-Mart a retail enterprise,” he recalled. “In the early meetings on Sam’s Club, Wilson said the main focus was serving small business, and over the years Wal-Mart and Sam’s Club had to walk the fine line of differentiation. But sometimes they veered across the line.”

Wilson said there were some heated discussions early on about the two divisions not competing against each other. Over time, the lines became blurred in retail, and there have been times a Sam’s Club looked a whole lot like Wal-Mart — carrying many of the same items.

Peggy Knight, a retired Sam’s Club executive, joined Wal-Mart in 1983 shortly after the first Sam’s Club opened in Midwest City, Okla. In 1985, she was a club assistant manager in Atlanta, working to grow the business in that market. Knight said Walton had a true vision for Sam’s Club early on and that was to serve small businesses, unlike Costco which catered more to the consumer.

“Merchandise has to be the star at Sam’s Club, and that was what made the clubs destinations,” Knight said. “Members could buy fur coats and Rolex watches at big discounts right along with their cleaning supplies. We carried upscale inventory and never advertised. It was far easier to stock 20 or 30 clubs than it is to stock 650 today. Lately, I am seeing more ‘wow’ merchandise in the local clubs I shop, and they are starting to look more like the clubs from the early days — fewer items but plenty of merchandise for members to choose from.”

Talk Business & Politics-Northwest Arkansas Business Journal recently asked Sam’s Club chief merchandising officer Ashley Buchanan about the retailer’s merchandise focus.

“When you think about Sam’s Club, you have to think about great items,” Buchanan said. “This is a product-focused channel. Specifically, you’re seeing us make big bets on fresh food, on our private brand Member’s Mark, and on delivering exciting items you can’t get anywhere else.”

GROWING PAINS
Knight said over the years Sam’s Club has gone through several identity crises, and at times focused more on small business and more lately trying to win millennial shoppers and other consumers. She said the high turnover rate of management at Sam’s Club over the years didn’t help because it fostered inconsistency.

Campbell agreed that Sam’s Club has had to operate in the shadow of Wal-Mart and that created challenges which its competitors don’t have. He said effective management needs to have a strong strategy, but it takes time to implement and even more time for members to realize the change because shopper perception lags.

In the three quarters Furner has run Sam’s Club, there have been management changes. Campbell said Furner immediately began to simplify the game plan. He said the next few quarters Wall Street will be watching for more improvement.

When asked about the upcoming 35th birthday and changes happening to grow sales, Ruiz said, “Going forward, you’ll continue to see us innovate while staying true to our roots. There are a lot of similarities between the club experience 35 years ago and today. We’ll still offer our members the things they’ve always loved about Sam’s Club while continuing to incorporate digital and modernize our approach.”