retail news in context, analysis with attitude

Walmart yesterday said that its annual earnings would decline in the coming year, that its e-commerce growth is likely to level off a bit, and that its various investments in new businesses and acquisitions would be likely to have an extended performance on its financial performance. At the same time, CEO Doug McMillon told investors, “I want to challenge your thinking about Walmart … There is a change within the company that is related to mindset, culture behaviour, and we are inventing again … expect us to test a lot and fail a lot.”

CNBC reports that Walmart cited “the impact of its acquisition of Indian e-commerce company Flipkart” as hurting its earnings outlook. In addition, the story notes, “Walmart has been investing heavily in recent months to compete with other retailers including Amazon and Target … It recently bought the lingerie company Bare Necessities. Earlier this month, it acquired Eloquii — a retailer that sells plus-sized clothes — for $100 million. Walmart also announced a partnership with U.S. movie studio Metro Goldwyn Mayer to create content with its video-on-demand service Vudu.”

Marc Lore, the founder of Jet (which Walmart also bought) and now the head of US e-commerce for Walmart, told the investors that “Walmart also expects to acquire more digital brands (like it did with Bonobos and ModCloth) to have ‘proprietary content’ on its website that shoppers can't find elsewhere. ‘Just four brands aren't going to do it, but imagine 40,’ Lore said during Tuesday's meeting with investors. ‘The idea is to buy and build’.”

In a statement, McMillon said, "We're adapting and transforming with speed to better serve our existing customers and reach new ones. We’re operating with discipline, balancing our short and long-term opportunities. While we're excited about what we've done so far, we aren't satisfied. As we execute today and build for tomorrow, our associates and unique omni-channel assets position us for success.”

Walmart also said that it expects fiscal 2020 total sales growth to be 3 percent or greater, and online sales growth to be as much as 35 percent. But that growth won’t be enough to compensate for the higher costs.

In related news, Yahoo Finance reports that Walmart “continues to kill off the American shopping creation it’s most known for, the massive supercenter that sells everything under one roof. With the U.S. market already having more than 3,500 Walmart supercenters and a focus by CEO Doug McMillon to increase spending on eCommerce and India, Walmart said Tuesday it will open a mere 10 supercenters in 2019. Capital expenditures are seen at $11 billion next year, unchanged on a year over year basis.”
KC's View:
I agree with the approach that Walmart is taking, but I do have to point out that the whole “test a lot and fail a lot” thing to be vaguely familiar. Where I have I heard that before? There’s a guy …I cannot remember his name … who once said, ““As the company grows, the size of the mistakes has to grow as well.”

I’m also intrigued by the idea that Marc Lore seems to see a time when the company has acquired as many as 40 digital-only brands, creating a suite of products and a source of proprietary items that Walmart can use to build beyond its core.

Clearly, Walmart has embraced the idea that it has to remake itself, accept new realities, and invest in a future where the long-term benefits are more important than the short-term impact.