Wal-Mart CEO Doug McMillon has been making some impressively huge changes within the big box store chain, both in the physical locations and online.
From improving employee compensation and benefits to laser focusing on better inventory control and eliminating products that simply aren’t selling, today’s Wal-mart is a leaner, meaner version of its former self. Even so, recent investor meetings have met with disappointing news that project flat earnings for fiscal year 2018.
The Wal-Mart Vision
Despite the projections, investors that stick it out and believe in McMillon’s longer vision may reap great rewards, since Wal-Mart has no intention of slowing its annual $11 billion investment in capital spending. Instead of building Supercenters and Neighborhood Markets, though, recent expenditures have gone toward improving the eCommerce side of the retail giant. Its purchase of Jet.com and increased spending for Chinese JD.com are signs of a greater commitment to digital fulfillment.
“I don’t think it’s an exaggeration to say we are going through a transformative period,” McMillion told the Wall Street Journal. Despite a lack of physical sprawl, Wal-Mart store sales have continued to rise for the last eight quarters, largely due to same-store gains and these eCommerce investments that are starting to pay off.
Even though Wal-Mart’s eCommerce sales have been slow to catch up to hopeful projections over the last nine quarters, they finally started an epic rise last quarter. Those 12 percent gains are nothing to laugh at. According to Wal-Mart CFO Brett Biggs, another jump of 20 to 30 percent in the second half of the year is expected. Turning Wal-Mart.com into a sort of marketplace filled with third-party vendors has helped to boost its popularity, and increasingly aggressive marketing will help to ensure that it remains competitive.
Although 2018 may be a year of lower levels of earnings for Wal-Mart, 2019 is projected to be something very different. Current forecasts look favorable. That will be the year that all the investment in eCommerce and current stores will begin to pay off. And although a mere five percent growth target is expected, that’s better than no growth at all and certainly a lot to create out of nothing in such a short time span.