Walmart to add more brands and online offerings to invest for long-term growth

by Kim Souza ([email protected]) 5,337 views 

(from left) Greg Foran, Walmart U.S. CEO; Marc Lore, Walmart eCommerce U.S. CEO; Brett Bigg, chief financial officer; Doug McMillon, CEO; Judith McKenna, CEO of Walmart International; John Furner, CEO of Sam’s Club.

Wall Street analysts heard from Walmart executives on Tuesday (Oct. 16) about their plans to build out the company’s ecosystem and capture opportunities for long-term growth. But, the retail execs warned there could be some short-term trade-offs.

Before the half-day session in Bentonville with analysts, Walmart gave its fiscal-year earnings guidance that included some impact from the Flipkart purchase. The new guidance will range from $4.65 to $4.80 per share, down between 25 and 30 cents, purely related to Flipkart. Next year, tentative guidance forecasts are slightly lower than this year, again because of Flipkart. Without the Flipkart impact, Walmart said earnings would be up next year.

“We’re adapting and transforming with speed to better serve our existing customers and reach new ones,” said Walmart President and CEO Doug McMillon. “We’re operating with discipline, balancing our short and long-term opportunities. While we’re excited about what we’ve done so far, we aren’t satisfied. As we execute today and build for tomorrow, our associates and unique omnichannel assets position us for success.”

McMillon told analysts during his presentation Walmart must “seize the moment” and rethink how it will continue to grow next year and beyond. He said there will be more investments and some will pay off while others will not. He told analysts Walmart has had plenty of failures in its 56-year history. He mentioned Helen’s Arts & Crafts, a standalone pharmacy and Bud’s Warehouse stores, all which provided learning opportunities for the retail giant. The failed hypermarkets were the precursor of the Walmart Supercenter, which has been the catalyst for the company’s unprecedented growth over three decades.

“Sometimes we start with version 1.0 and by the 3.0 update we have a model that might work,” McMillon said. “We need to have a great sense of urgency and we are building our our ecosystem where we see lots of opportunities.”

The ecosystem that Walmart has already amassed includes its stores and acquired e-commerce brands like Bare Necessities, Bonobos, Hayneedle,, ModCloth, Moosejaw and There are also third-party marketplace brand partnerships such as Flipkart,, Lord & Taylor, Mantra and Jabong in India, and Advance Auto Parts, announced on Tuesday. That just covers the shopping part of the ecosystem, which one might expect for a retailer.

McMillon said there are other areas where Walmart can leverage its strengths and relationships as it continues to expand. Financial services are one such area Walmart continues to invest. One of the elements of the Flipkart deal where Walmart saw the most potential is in financial services.

The Walmart ecosystem as of October 2018.

Walmart International CEO Judith McKenna spoke to analysts, saying the “stickiness” of mobile financial services has been a big win for Flipkart. Walmart also introduced Cashi in Mexico, a mobile-payment platform that allows consumers to transfer money, hoping to create that same “stickiness” with the shopping base in Mexico. In the U.S., Walmart has a partnership with PayPal and it also invested in the Walmart-2-Walmart cash transfer system for U.S. customers. Walmart’s mobile payment platform, Walmart Pay, continues to be pushed by the retailer with moves to only allow shoppers the benefit of Savings Catcher, if they they use Walmart Pay.

McMillon said Walmart runs optical and pharmacy businesses but there is more the retailer can do. Walmart continues to test and run in-store clinics in select markets with the help of Quest Diagnostics. None of the executives mentioned Walmart’s ongoing partnership with Humana Health, and it was not listed on the ecosystem graphic shared with analysts.

One area Walmart execs discussed briefly was the digital entertainment space, mentioning the partnerships with Rakuten Kobo, Eko and Walmart assets eBooks and VUDU. Walmart recently announced a joint venture with Eco, an interactive video pioneer, to help the retailer develop original content for streaming through VUDU. Walmart said the content could range from cooking shows to interactive toy catalogs and will allow viewers to participate in and shape stories as they are being told.

“Our partnership with Eko will help us accelerate efforts to deepen relationships with customers and connect with new audiences in innovative ways and is one part of an overall entertainment ecosystem we’re building. By partnering with organizations across the industry to create original, interactive content, we’re bringing the next generation of entertainment to customers and delivering memorable experiences they can only find at Walmart,” said Scott McCall, senior vice president of toys, seasonal and entertainment for Walmart U.S.

McMillon also said Walmart has a small advertising agency and there is more growth possible with AdIquity, Flipkart Ads and Walmart Media Group. He also said Walmart has never tried to monetize its massive data holdings, but that’s another opportunity.

The home and personal service spoke of the ecosystem wheel includes partnerships with tech support startup HelloTech, FedEx shipping centers in stores, SmartStyle hair salons in stores, Handy, which offers installation or assembly in services in 2,000 stores, and Essentials PetCare, a veterinary clinic test underway in Florida.

The logistics spoke of the wheel includes partnerships with third-party final-mile delivery services such as Postmates, Doordash and Rakuten in Japan, along with Flipkart’s ekart logistics business in India, and the recent acquisition of Cornershop delivery platform for Mexico and Chile.

Brett Biggs, Walmart’s chief financial officer, said growing the Walmart ecosystem allows the company to serve customers in a unique way and when that’s combined with financial strength of Walmart’s half-trillion in annual sales, the retailer can deliver good near-term results while also investing for long term.

Biggs said Walmart will work to mitigate risks of higher prices caused by tariffs, but said in some cases higher prices will be passed on to customers. When asked about the lower 35% guidance for eCommerce growth next year, compared to 40% this year, he said “it’s about the same year-over-year.” He added over two years this segment will see nearly double sales growth. He said the base is larger and the company is pleased with the growth projections for next year.

Marc Lore, CEO of Walmart U.S. eCommerce, said added more than 2,000 new brands this year and the company is being more thoughtful about the quality of brands added to its first party offerings and third-party marketplace. He said continues to add category specialists at a rate of 40 to 50 per month. He said the strategic partnerships with Lord & Taylor and now Advance Auto Parts, which will offer products on and eventually services in Walmart auto care centers of some 2,000 stores, are about improving the inventory mix with higher-margin items. He said Walmart already does a good job offering the most popular items online, but those are often at the lowest margin. He said long-tail specialty items carry more margin and that will help profitability.

“We are better positioned to push out more overnight delivery next year and voice is the future for how people are going to shop in 10 to 20 years. JetBlack is providing great learnings for us in that area,” Lore added. “We will look to incubate more technology innovators like JetBlack in the future through our Store No. 8 division.”

Walmart U.S. CEO Greg Foran said most stores are in better shape today than a year or two ago, but there are still a few outliers and more work to be done. He said Walmart is buying for less, selling for less and operating for less than a year ago and that’s good for the overall bottomline. He said Walmart will continue to leverage technology throughout the store for its employees and its shoppers.

This holiday season Walmart plans to rollout the “checkout with me” process in its stores which allow shoppers to skip the line and be helped by employees via a mobile device that takes card payments and can dispense a receipt. This process was tested in Northwest Arkansas at select stores in the lawn and garden centers.

Chief Merchandising Officer Steve Bratspies said Walmart bought deeper in the toy category this year and is expanding the toy areas in several stores as well. The retailer made no mention of any impact it expects to see from the bankruptcy filed by Sears this week.

McMillon told analysts Walmart’s top management team continues to make adjustments while in flight. He said if they saw another unique opportunity like Flipkart they would have to consider it. He said he will choose the long-term growth option every time over short-term gains and that’s how he’s managing this company. He said the investments are starting to pay off but he told analysts there’s no way to say when the e-commerce division and Flipkart will become profitable. He also promised to be transparent with analysts with respect to the changing dynamics likely to impact shorter-term earnings.

Wall Street liked what it heard from McMillon and his team. Walmart shares (NYSE: WMT) moved higher on the day in heavier-than-normal volume. Shares closed at $95.81, up $1.99. Over the past 52-week period shares have traded between $81.78 and $109.98.