Walmart expects to invest nearly $14 billion in fiscal 2022—most of that in the U.S.—to accelerate its automation initiatives and supply-chain efficiencies in a drive to earn "primary destination status" with customers.
"Speed matters," Walmart President and CEO Doug McMillon said in a presentation at the company's annual investors meeting Feb. 18. Walmart will "invest more aggressively in capacity and automation," he added, to help it become not just a go-to store but an anywhere, anytime, go-to service for consumers.
The Bentonville, Ark.-based retailer announced fourth-quarter and fiscal 2021 earnings on Feb. 18, reporting comp-store sales growth of 8.6% for the quarter and for the full year, as well as record revenue of $152.1 billion (up 7.3%) in the fourth quarter.
COVID-19-related costs for the fourth quarter were $1.1 billion; the company recorded adjusted earnings per share of $1.39 for the quarter and $5.48 for the year. Walmart additionally notched its 48th consecutive year of dividend increases.
"This is the time for us to accelerate," Walmart EVP and Chief Financial Officer Brett Biggs said during the meeting. As announced in January, the company plans to scale up its launch of microfulfillment centers ("local fulfillment centers," or LFCs, as Walmart labels them) that currently rely on a combination of robotic and human-directed order picking to speed order fulfillment. Other investments in automation and in bolstering the supply chain will be vital in keeping the Walmart machine humming as quickly and efficiently as possible, the company indicated.
"We remain laser-focused on operational efficiency," Biggs said, adding that the big, targeted investments planned for fiscal 2022 will allow Walmart to "fully optimize" its strategy.
That strategy from consumer perspective is all about omnichannel buying, giving customers the flexibility to get precisely what they're looking for when and where they want it, whether that's in store, for curbside pickup or for delivery to their residence or to a secure pickup location. McMillon referenced Walmart's recently announced trial of grocery delivery to temperature-controlled home smart boxes as well as the potential for delivery to residential garages or even in-residence delivery.
As the COVID-19 pandemic wanes, "people will still want to shop in compelling stores," McMillon said, but they will also seek always-available options for pickup and delivery, as well as "a merchandise assortment that seems limitless." Some consumers, he predicted, will "pay us to keep them stocked" on certain grocery and household essentials—with the company's Walmart+ membership program, launched in September, a core component of that Walmart-as-a-service model.
The whatever-you-want, whenever-you-want aspiration offered during the presentation—and the heightened supply-chain investments intended to help Walmart reach that goal—stood in no small contrast to the images of Walmart stockouts circulating not only during the early months of the pandemic last spring and summer but also in the past week, as severe winter storms forced closures or shortened operating hours for hundreds of Walmart stores across the country. Analysts at R5 Capital called the retailer's current out-of-stocks "rampant and bizarrely inconsistent" and commented, "Our research indicates that the company’s challenges around its supply chain is a virtual emergency."
McMillon acknowledged the company's inventory challenges in 2020, praising the company's response to the pandemic and its moves to make store operations adjustments and continue to ramp up e-commerce while saying, "We certainly didn't get everything right."
However, the company's strong financial position, aided by U.S. comp-store sales growth that exceeded consensus expectations and the shedding of select lower-growth international businesses (Japan, Argentina, the U.K.), make now the time to go big to shape the retail environment of the future, McMillon and Biggs indicated.
"We feel emboldened," McMillon said, calling Walmart's combination of stores and e-commerce a winner and noting that the company will look to leverage its status as the country's biggest grocery seller in building out and scaling up its other businesses, including healthcare and advertising.
Walmart is less risk-averse than it used to be, Biggs said. The company, he added, "is different than it was one year ago, three years ago and certainly five years ago." While uncertainties surrounding the pace of COVID-19 vaccinations, vaccine efficacy and future economic stimulus make forecasting for the coming year unusually challenging, he said, "We feel very good about the underlying business."