Walmart Unveils 3-year Strategic Framework
Wal-Mart Stores Inc. has unveiled a new plan to drive sales by bolstering its U.S. and e-commerce businesses.
The Bentonville, Ark.-based mega-retailer intends for its new three-year strategic framework to improve the in-store experience, use Walmart’s unique supply chain capabilities to lower costs, and establish meaningful digital relationships with shoppers.
"These are exciting times in retail, given the pace and magnitude of change," said Walmart President and CEO Doug McMillon. "We have strengths and assets to build on and are making progress to position the company for the future. We're encouraged by recent customer feedback and will continue to get stronger. Our investments in our people, our stores and our digital capabilities and e-commerce business are the right ones. We will be the first to build a seamless customer experience at scale to save our customers not only money, but also time."
Higher Earnings Ahead For Walmart
Walmart noted that due to a stronger-than-anticipated impact from currency exchange rate fluctuations, it currently expects net sales growth for the current fiscal year to be relatively flat. Excluding this impact, net sales growth would be about 3 percent for 2016. Last February, the company said that it expected net sales growth of between 1 percent and 2 percent.
"Our sales growth over the next three years is estimated to range between 3 percent to 4 percent annually, which will add approximately $45 billion to $60 billion in sales," observed Walmart EVP and CFO Charles Holley, whose impending retirement at the end of 2015 was recently made public. "Within the last year, we have experienced traffic and comp sales improvements in our Walmart U.S. business, and our plan reflects that positive momentum continuing."
According to McMillon, Walmart is "actively reviewing our portfolio to ensure our assets are aligned with our strategy. But we will be thoughtful in our approach, recognizing our responsibility to drive shareholder value."
Discussing Walmart's long-term profitability, Holley noted: "Fiscal year 2017 will represent our heaviest investment period. Operating income is expected to be impacted by approximately $1.5 billion from the second phase of our previously announced investments in wages and training, as well as our commitment to further developing a seamless customer experience. As a result of these investments, we expect earnings per share to decline between 6 percent and 12 percent in fiscal year 2017; however, by fiscal year 2019, we would expect earnings per share to increase by approximately 5 percent to 10 percent compared to the prior year."
Delivering Shareholder Value
Additionally, Walmart's board of directors has authorized a new $20 billion share repurchase program and retired the $8.6 billion remaining on its 2013 authorization.
"We remain committed to our strong balance sheet and have said that we would only use it for strategic purposes," explained Holley. "Last year and this current year, we have not utilized that capacity, as we felt it was not the right time to drive a larger volume of share repurchase. We expect over the next three years to generate around $80 billion in cash. Given the current landscape, we have a strategic opportunity, and our intent would be to utilize this new $20 billion authorization over the next two years."
Continued Holley: "This share repurchase program, combined with our annual dividends, reinforces our continued commitment to delivering increased value to shareholders. We remain committed to maintaining a strong balance sheet and financial position that enables us to continue focusing on growth-oriented opportunities."
In accordance with the framework, Walmart's capital investments will be about $11 billion for fiscal year 2017 and remain flat in fiscal years 2018 and 2019. This is lower than the revised fiscal 2016 estimate of about $12.4 billion, mainly because of a moderation of physical-store expansion. Meanwhile, the company's investments in e-commerce and digital initiatives are expected to come to about $1.1 billion in fiscal 2017.
Walmart operates 11,532 stores under 72 banners in 28 countries, and e-commerce websites in 11 countries, employing about 2.2 million associates worldwide.