Price investments slowing at Walmart amid operations push

Wal-Mart Stores, which for many years has won on price, can’t afford to lose everywhere else.

That was the message from new U.S. CEO Greg Foran, who in a presentation Wednesday said his priorities for 2015 were to improve “core operations” — including front-end service and store conditions — as the foundation for improving sluggish sales. These investments in operational initiatives will likely come at the expense of price investments, he said, even while acknowledging Walmart’s leadership at the cash register also is not what it once was.

“This year, we’re focusing on addressing our store experience and we’re working through what amount and time we will invest in price,” Foran said. “Although I can assure you price remains every day part of our discussions and actions.”

Foran noted that Walmart had “opportunities” with price — particularly, in better execution of its EDLP strategy — and said the productivity loop, sourcing initiatives and other tools would continue to allow the company to maintain “unbelieveably competitive” pricing. But he admitted Walmart’s customary price leadership had eroded in some markets.

“While we have pockets of leadership, in more competitive markets our gap is too small. And against some competitors we lost a little bit of our muscle for reacting quickly.”

Foran said Walmart’s longer term initiatives include reinvention of both the Supercenter and Neighborhood Market store, noting the latter format is most effective at 41,000 square feet and larger. The company is also reengineering its supply chain to better integrate its digital and physical retail bases.

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“We continue to be extremely focused on price and I hope that came through … we’re not moving away from that at all — but we also recognize that assortment and the experience that you have in store is pretty important as well,” Foran said. “And we’ve got to make sure that we get that part of the equation right. We’re focusing heavily on that this year, without taking our objective of continuing to ensure that Walmart does win on price.”

Foran said the company was shooting for a noticeable improvement in store operations by the holiday season, but he asked analysts to envision a still different store in “two to three years,” which was “light bright and large” with relevant and well-merchandised assortments, vibrant fruits and vegetables and fast and efficient checkouts.

“Retailing is a simple business,” he added. “We buy some merchandise and we sell it. Our ambition is clear, we will grow sales. We will improve the core operations by running great stores.”