Walmart is facing some choices over how to stabilize the business after a poor first quarter in which sales growth stalled and operating income in the United States dropped by $1 billion.
Following its Associate Celebration in Fayetteville, Arkansas, a panel of senior business leaders, including President and CEO Doug McMillon and John Furner, head of U.S. operations, answered some of the questions from the investing community.
They discussed how Walmart is dealing with inflation, labor issues, and other issues, as well as what the business is trying to develop in its Walmart+ subscription program.
Company executives received the most questions about how Walmart is grappling with high inflation and handling pricing.
McMillon said: “I am concerned about the inflation rate, and should it stay at this level or go up and be there for a sustained period of time — I think that has a negative impact on too many families,”
Walmart, as per McMillon, is keeping a close watch on its most value-conscious customers and how increased food costs for core grocery products like rice, beans, pasta, tuna, and milk are affecting them.
McMillion said: “We make money in fresh food and in dry grocery, and we can manage inflation in those areas.”
Walmart executives stressed the business’s Every Day Low Price strategy as a method to continue to attract consumers with a wide variety of discretionary spending levels and claimed the company has been able to engage with some of its many suppliers to uncover cost-cutting opportunities.
Walmart International’s president and CEO, Judith McKenna, stated that corporate leaders from across the world with “deep expertise” in inflationary times are assisting the retailer’s various teams, including Walmart U.S., in navigating the present situation.
Walmart is planning two value propositions for the future, depending on how the economic landscape for consumers continues.
It can leverage its low-price reputation if shoppers become even more price-conscious, or it can lean into its convenience options, especially around digital shopping, if the price becomes less of an issue, McMillon said.
Following a difficult labor market last year, Sam’s Club and Walmart U.S. have both been “fully employed” in recent months, with a few vacancies in certain areas or skill sets, according to executives.
Sam’s Club CEO Kathryn McLay said the club’s recent redesign of its recruiting processes, which now allow workers to be hired within 24 hours, as well as compensation increases, had helped expand employment.
Meanwhile, Walmart U.S. has seen its staffing fluctuate. Levels dropped in January as the omicron variant spread and then a “surge” of workers returned in February, Furner said. Since the end of March, employment has further stabilized, he said.
Digital innovations are also changing the nature of work. McMillon said Walmart now has “high confidence” in the productivity that automation can achieve following work over the last year or so with startup partners.
McMillon said: “We’re really excited about what that means throughout the supply chain — cost-wise, productivity-wise, but also as it relates to the associate experience.”
He noted automation can make it a “dramatically different job” for workers when the tech can make pallets “department-ready” when loaded and improve the accuracy and management of inventory.
Walmart has been tight-lipped about membership numbers for Walmart+, which launched in September 2020, but McMillon said they’re looking to increase signups.
Delivery savings could be a key perk to attracting and locking in Walmart+ members. Furner noted that, anecdotally, Walmart+ members who are using the service more frequently are choosing delivery more often than going to the store.
Furner also referenced the recently expanded fuel savings for members, which is now a discount of up to 10 cents on each gallon of fuel at participating fuel stations, as a way the retailer is looking to boost membership.
In March, the retailer announced the rollout of the membership to its associates — a move that not only serves as an employment perk but could also lead to potential customer sign-ups as workers talk about their experiences with the service.
Going forward, Furner considers the fuel savings, in-store scan-and-go payment option and free delivery as particularly appealing features for shoppers. The unlimited delivery feature is becoming more attractive as Walmart has improved its capacity with more time slots and better product availability, he said.