Walmart's Growth Strategy: Investing in Supply Chain and Digital Services
2023-06-20
Walmart Inc. (NYSE:WMT) recently held its Evercore ISI Consumer & Retail Conference Call on June 14, 2023 at 10:15 AM ET. During the meeting, the company discussed its key drivers for business growth, which include expanding into general merchandise, growing other businesses, and improving the unit economics of its services.
To improve unit economics, Walmart is investing heavily in its supply chain, upskilling its workforce, and redeploying individuals to different jobs to increase productivity. The company is confident in its ability to grow and feels comfortable with its current position.
Walmart's plans for product and service expansion include digital services such as advertising, fulfillment services, and data ventures. The company aims to scale these services in Canada, Mexico, and Chile, leveraging its hundreds of millions of customers. Walmart believes that these services are interdependent and that it won't be able to excel in one without being good at the others. The company is also focused on improving its understanding of customers and creating great buying experiences for them. Walmart plans to identify good opportunities for Sam's Club and will continue to adjust its portfolio accordingly.
During the meeting, the CFO discussed the company's progress on strategic initiatives. The international portfolio is stable, and Walmart plans to grow operating income faster than sales, with the international portfolio being a significant component of that. The company expects the international portfolio to outperform the rest of the enterprise on both a sales and operating income basis. In the US, Walmart is beginning to see progress in some of its initiatives, such as the advertising business and 3P marketplace, and is working on getting them back to profitability and driving increased returns.
Walmart's capital spending plans involve investing in itself through CapEx to achieve high ROI. The company plans to balance capital allocation by returning cash to shareholders through share repurchases and dividends. Walmart aims to invest for the long term and increase dividends in the future while increasing margins and free cash flow. The company targets a 2x leverage ratio and an AA credit rating to provide flexibility in using capital.
In conclusion, Walmart is focused on expanding its business, improving its unit economics, and investing in itself for long-term growth. The company's plans for product and service expansion, as well as its capital spending plans, are aimed at achieving high ROI and providing flexibility in using capital. Walmart is confident in its ability to grow and is making strategic investments to achieve its goals.