Soon after Doug McMillon became Walmart CEO in 2014, he spoke about the need for change and staying ahead of consumer demands. His primary goals were to improve same-store sales and merchandising, keep prices low and create transformative growth by adding capabilities in e-commerce and mobile commerce.
McMillon was groomed for the role of Walmart’s chief executive, working his way up the ladder as a buyer and then an executive in various roles before becoming the Sam’s Club CEO in 2005. He helped grow Sam’s Club sales and was promoted to CEO of Walmart International in 2008 where he served until early 2014 when he was chosen to succeed the retiring Mike Duke as the company CEO.
During McMillon’s tenure as CEO, the retail giant has seen top-line revenues grow from $485.651 billion in fiscal 2015 to $523.964 billion in fiscal 2020.
Operating income growth has been harder to come by during the past several years as Walmart made big investments in technology and expanded e-commerce capabilities, including the $3.3 billion it paid for Jet.com, continued investments to expand e-commerce in China, and the blockbuster $16 billion majority acquisition of India retailer Flipkart completed in August 2018.
Walmart posted an operating income of $20.568 billion in its most recent fiscal year, down from $21.957 billion the prior year. Walmart’s operating income has continued to decline since 2015 when operating income topped out $27.147 billion. Despite a declining operating income, earnings per share were $5.19 in fiscal 2020, well ahead of the $2.26 per share reported the prior year. The earnings per share in fiscal 2020 were the highest among the past six years. Earnings suffered in 2019 and 2018 as the technology investments and more than $2.7 billion in worker raises were enacted between 2015 and 2016.
“The ways we can use technology today and in the future are exciting, but our business is still a people business. We are people-led and tech-empowered, and that makes investing in our associates a strategic priority,” McMillon noted in his April 24 letter to shareholders.
McMillon said the starting wage at Walmart is 50% higher than four years ago and benefits like $1-a-day college degree opportunities, expanded parental leave policies and training academies continue to provide employees opportunities for advancement.
ADDING NEW ‘INGREDIENTS’
McMillon said in 2014 he would increase the pace of change to ensure customers would be served the way they want in the future.
“I look to the future confident that Walmart has all the ingredients necessary to prosper in the new retail world that is unfolding,” he said in 2014.
McMillon said early in his tenure as CEO he was focused on improving financial performance and improving store and club performance. He said investment in e-commerce would continue and keeping customer expectations would be at the forefront of the business.
“Our work starts and ends with the customer … The road ahead will not always be easy, but by being customer-focused, hungry, fast and accountable, we will win and have a good time doing it,” McMillon said in a 2016 letter to investors.
By 2017, McMillon’s letter spoke of the power Walmart was beginning to harness from prior investments in technology and people. He again pushed the focus on the pace of change which continued to increase with each year. He said the plan to win involved making shopping easier for families through omnichannel retailing – various ways to shop. He said Walmart would continue to change the way it worked by cutting corporate bureaucracy and applying technology across the business.
He told shareholders management would focus on reducing expenses. The core of his message was to say Walmart sought to be the most trusted retailer on the planet.
In 2018, McMillon said Walmart had the right strategy and the company was making progress at accelerating innovation to save customers time and money. In 2018, Walmart hit $500 billion in revenue for the first time and Walmart U.S. delivered its highest comp-sales growth in nine years, while the e-commerce segment posted 44% annual growth.
In 2019, McMillon reflected on some of the things he had learned in his five years as CEO. He said managing risks and playing the long game while also managing the business day to day was a balancing act and crucial for the company’s survival for the next generation. He spoke again about the constant change the business was undergoing. McMillon said a few years ago he could not have imagined some of what the retailer was doing in the business in 2019, but at the same time, it also felt like Walmart was just getting started.
THE COVID CRISIS
Walmart is now facing one of the biggest challenges in its history as are many businesses across the globe with the COVID-19 pandemic. A common theme McMillon has had in each of his six annual letters to shareholders is the nature of change. He said the world is working through a global health crisis and Walmart is making big decisions in a fluid environment.
McMillon said Walmart employees have continued to step up and report for work while demonstrating a “we’ve got this” attitude. He said the company made adjustments to attendance policies for those who fall ill or are uneasy working during this time. He said Walmart also paid special cash bonuses and accelerated the first-quarter bonus to help support hourly workers with additional money. McMillon said the physical, financial and emotional wellbeing of employees are top priorities for him as the CEO.
He also spoke of serving customers with the help of suppliers during these challenging times.
“Our supply chain has been stretched but, together with our suppliers, we’ve kept the supply lines open so people can get what they want and need and at a great value,” he noted.
He said Walmart also prioritizes helping others during times of crisis and staying open allows it to do so. The hiring of more than 150,000 temporary workers helping to respond to changing consumer demands helps the company and helps the economy. McMillon also assured investors a top priority is to manage the business well during the crisis and after.
“We aren’t taking our eye off the ball as it relates to our financial strength, including areas like inventory management. We’re making important short-term decisions that protect us now and set us up for the future,” McMillon noted.
He said Walmart is a leading retailer because of investments made in technology and higher wages,, and its willingness to change – and fail, sometimes – and keep trying new ideas.
“In a time of upheaval in everyday life, our ability to serve customers in unique ways has been a game-changer for so many. We’ll continue to be there for people in times of crisis, and we’ll continue to innovate and move forward.”