After a tough first quarter in which sales growth slowed and its U.S. operating profit was hit by $1 billion, Walmart faces tough questions about how to stabilize the business.
Last Friday, a panel of senior business leaders, including President and CEO Doug McMillon and John Fournier, head of operations in the United States, answered some of these questions from the investment community following its celebration associated with Fayetteville, Arkansas. They gave an update on how Walmart is grappling with inflation, labor challenges and more — including what business leaders are doing to grow its Walmart+ subscription service.
Here are the best takeaways from the event.
Inflation and prices remain in the foreground
Company executives received the most questions about how Walmart is dealing with high inflation and price management.
“I’m concerned about the rate of inflation, and should it stay at this level or go up and stay there for an extended period – I think it’s negatively impacting too many families,” McMillon said.
McMillon said Walmart is closely watching its most value-conscious group of consumers and how they are impacted by the high food costs of staple groceries such as rice, beans, pasta, tuna and milk .
“We make money in fresh food and dry groceries, and we can handle inflation in those areas,” he said.
Executives pointed to Walmart’s Every Day Low Price strategy as a way to continue to attract shoppers through discretionary spending levels and said that among its wide array of suppliers, the company has been successful in working with some to find ways to reduce costs.
Judith McKenna, president and CEO of Walmart International, noted that business leaders around the world who have “deep experience” in times of inflation help the retailer’s various teams, including Walmart US, navigate in the current landscape.
Going forward, Walmart foresees two value propositions depending on the changing economic landscape for consumers: it can leverage its reputation for low prices if shoppers become even more price-conscious, or, if price becomes less one issue, the retailer can lean into its convenience options, especially around digital shopping, McMillon said.
Labor issues begin to ease
After a tough labor front for retailers last year, Sam’s Club and Walmart US have both been at “full employment” in recent months with some gaps in certain geographies or skills, executives said.
Sam’s Club CEO Kathryn McLay said the club chain’s recent overhaul of its hiring processes, which now allow workers to be hired within 24 hours, and investments in wages have helped boost employment
Meanwhile, Walmart US has seen its workforce fluctuate. Levels have dropped in January like the omicron variant spread then a “wave” of workers returned in February, Furner said. Since late March, employment has stabilized further, he said.
Digital innovations are also changing the nature of work. McMillon said Walmart now has “great confidence” in the productivity automation can achieve as a result of work over the past year or so with startup partners.
“We’re really excited about what this means across the supply chain – in terms of cost, productivity, but also in terms of the associate experience,” McMillon said, noting that automation can make it a “radically different job” for workers when technology can make pallets “ready for service” when loaded and improve accuracy and inventory management.
Walmart+ Features and Membership Acceleration
Walmart has been tight-lipped about membership numbers for Walmart+, which launched in September 2020, but McMillon said he was looking to increase signups.
Shipping savings could be a key benefit in attracting and locking in Walmart+ members. Furner noted that, anecdotally, Walmart+ members who use the service more frequently choose delivery more often than going to the store.
Furner also referenced the recently expanded fuel savings for members, which is now a rebate of up to 10 cents on every gallon of fuel at participating gas stations, as a way for the retailer to boost membership. In March, the retailer announced the rollout of membership to its associates — a move that not only serves as an employment benefit, but could also lead to potential customer sign-ups when workers talk about their experiences with the service.
Going forward, Furner sees fuel savings, in-store scan-and-go payment option and free delivery as particularly attractive features for shoppers. The unlimited delivery feature is becoming increasingly attractive as Walmart has improved its capacity with more time slots and better product availability, he said.
Improve store operations and standards
Over the past year – particularly in the “recent months” – the company has worked to improve the way Walmart’s stores and supply chain work together as part of the retailer’s efforts to improve store operations and standards for its customers and employees, Fournier said.
For customers, the retailer is focusing on Net Promoter Scores, which measure customer loyalty and inventory availability across all channels, Fournier said.
On the labor front, Walmart is looking to leverage digital innovation and listening sessions to help its workers. Last year, the retailer offered smartphones to more than 740,000 of its US employees and launched its workplace app. [email protected]
“Since that point, we’ve taken all the processes and technology they need and put them on this device so that when an associate walks in, ready to go to work, they point to their device and then whatever they have need is in their hands to try to save them time and facilitate their productivity,” Fournier said.
The retailer uses employee feedback to develop solutions and products to address issues.
Fournier said Walmart held listening sessions for managers, including those in regions, divisions and stores, and for associates to not only help employees feel more connected to their stores, but also to show that they have a say in improving the business.
“We have digital listening tools where we get 10 million questions a week. … Last week we had 3,000 associates that we had listening sessions with,” Fournier Noted.