Walmart CEO says growth can continue; company to raise wages for hourly workers

Walmart CEO Doug McMillon said with $564.2 billion in sales the retailer is just getting started. He remembered the late former CEO David Glass saying the same thing more than 30 years ago when he was leading the retail giant during its grocery and supercenter expansion.

McMillon, who spoke to investors early Thursday (Feb. 18), said Walmart has the talent, culture and assets to continue its growth. He said the record revenue from fiscal 2021 put the company a year ahead of its expectations but work needed to shore up the bottom line. Net income for Walmart fell to 9.2% to $13.51 billion for the fiscal year ending Jan. 31.

While Walmart execs expect lower net income this year, they do see momentum behind the U.S. and Sam’s Club businesses. Walmart U.S. continued to accelerate comp sales last year through the fourth quarter as the retail giant was deemed an essential business to remain open amid the pandemic. Walmart said it incurred $4 billion in direct COVID-19 costs last year, some of which were bonus pay, but other costs are likely to continue this year until the pandemic ends or is contained. Walmart did not break-out those cost projections when asked by analysts during the question and answer session of the virtual event.

As Walmart continues to reduce its international holdings, the success of Walmart U.S. with 66% of total company revenue remains critical to the retail giant’s long-term success. Walmart U.S. CEO John Furner said he continues to work with the e-commerce team and merchants who now manage categories after the two departments merged last year. He said part of that work also entails meeting with the largest marketplace and third-party sellers on Walmart.com. He said Walmart’s long-term success must include growing the marketplace.

Furner said the company’s integrated omnichannel – shopping in-store and online – strategy focuses on being the primary destination for customers anytime, anywhere and any way they choose to shop. He said the prior investments Walmart made in expanding online grocery, e-commerce fulfillment and employing technology for increased efficiency were timely and helped the company navigate a challenging year.

Furner said there were plenty of lessons learned this past year and times when Walmart was not adequately prepared for demand surges and other supply chain hiccups. He said the company also reduced store hours and opted to close on Thanksgiving Day which held back some profits, but he would do it again as it was needed during the height of the pandemic.

Walmart U.S. also recently divided its store management into four groups, half of which fill orders and keep shelves stocked. He said Walmart made the changes for better streamlining of operations. He said inventory availability has to be right every day and that was not an easy job during supply chain disruptions. Furner said 425,000 of the workers who stock stores and dispense products to customers would see an hourly pay raise to average $15. This wage increase was announced by Furner in a memo Thursday.

Furner, who began his career as an hourly employee in the garden center at Store No. 100 in Bentonville in 1993, he said in the memo 2020 was as challenging a year as he can remember but it was the “people who truly made the difference.” He said personal shoppers picked more than 6 billion items for pickup and delivery last year and Walmart U.S. grew its sales by $29 billion.

“We grew by more than half the total sales we reported in my first year at Walmart,” he said.

Furner said the hourly raise will begin March 13 for store employees in digital and stocking workgroups, which is roughly 425,000 employees. The employees will see starting wages between $13 and $19 per hour depending on the store’s location and market. Walmart has said the starting wage is just part of the equation.

Walmart U.S. grew comp-store inventory by 1.1% in the quarter and 7.1% overall. Walmart said this higher inventory position helped to improve in-stock levels from the prior quarter.

Walmart reported high single-digit comps in food sales in the quarter across more categories as store hours were expanded and in-stocks improved in the quarter. Store pickup and delivery saw record-high sales volumes as customers continued to shift toward e-commerce. In health and wellness, Walmart reported mid single-digit comp growth as higher pharmacy sales were partially offset by lower eye-center proceeds amid COVID-19 restrictions. General merchandise comps grew in the low single-digits as consumers looked for ways to relax and entertain themselves at home. Furner said general merchandise sales were strong in some categories to the point of sell-out. He said auto care centers also began to reopen in the quarter after being shuttered most of the year.

Walmart did not provide earnings guidance but the retailer did say it expects the U.S. division to see comp sales up low single-digits, excluding fuel for this year. Noting it would be a tough comparison to the unprecedented demand from last year. The company expects U.S. operating income to increase slightly as the pandemic hopefully subsides. The U.S. segment will see a substantial amount of the $14 billion in capital expenditures planned for the year fulfillment centers to be added to stores for automated order filling with increased efficiency. Walmart said it will continue to remodel stores and it plans to add no new stores this year.

Q4 SNAPSHOT (Walmart U.S.)
• Walmart U.S. net sales $99.6 billion, up 7.9%
• Operating income of $5.2 billion, up 17.4%
• eCommerce sales up 69%
• Comparable sales up 8.6%, thanks to 6.2% contribution from online sales
• Comparable store transactions were down 10.9%,
• Comparable average ticket increased 21.9%