Walmart trims store growth to focus on remodels, e-commerce

Walmart Stores on Tuesday said it anticipates opening fewer than 15 new Supercenters in the U.S. next year as it focuses on ramping up its e-commerce business, driving same-store sales growth and integrating online and physical commerce.

The slowdown in new-store development continues a pattern of the last few years, in which the Bentonville, Ark.-based retail giant opened 60 Supercenters last year and plans fewer than 40 new Supercenter openings in the current fiscal year (fiscal 2018), which ends in January.

“If you think about the Supercenters, they are largely built out,” said Doug McMillon, president and CEO, Walmart Stores, during a question-and-answer session following the company’s annual gathering of analysts and investors at its headquarters. “There will still be a few opportunities to do a few here and there.”

Walmart said it plans to open fewer than 25 new U.S. stores in total, including fewer than 10 Neighborhood Markets, compared with the hundreds of stores per year that it was opening a decade ago.

The company continues to see opportunity for its smaller format Neighborhood Market banner, which is similar to a traditional supermarket, but the focus in the near term will be on building out the company’s e-commerce capabilities, McMillon said.

“We may come back to it later, but we are making a deliberate choice that we are going to win in e-commerce,” he said.

The company maintained its capital-expenditure projections at about $11 billion for next year, not including acquisitions, which is about even with the current-year investment plan.

Brett Biggs, executive VP and CFO, said the company is looking at real estate opportunities differently than it has in the past.

“As we look at opportunities in the U.S., we may say, ‘That [location] is better served with a store, that [location] is better served with e-commerce,’” he said.

Greg Foran, president and CEO of the Walmart U.S. division, said the company is focusing on making sure its existing fleet of stores is freshened up and reconfigured to best serve e-commerce delivery and click-and-collect shoppers.

“We’ve got a lot of stores that we opened 2003, 2004, 2005, 2006 — we were doing circa 300-odd Supercenters a year during that period — and so a lot of those need a good remodel,” he said.

As part of its emphasis on e-commerce and in-store pickup, Walmart said it expects to roll out in-store pickup to about 2,000 of its 4,600 U.S. locations by the end of next year, up from about 1,000 that currently offer the service. The company now employs some 18,000 “personal shoppers” who are picking items in the stores for the rapidly expanding in-store pickup service.

Foran said Walmart is focused on “building trust” with its customers, in part by improving the quality of its perishables offerings in its stores.

“We need to push ourselves further on quality,” he said. “This is especially so in fresh.”

Walmart has been working with its suppliers to move perishables through the supply chain faster, according to Foran. Through a pilot program, the company is achieving an average of an additional two to three days of freshness for product in-store, and up to an additional four days of freshness in strawberries, he said.

Sam’s Club is also doubling down on improving its perishables offering by investing in training and expertise, and gearing its appeal increasingly toward budget-conscious consumers rather than business customers, said John Furner, president and CEO of Sam’s.

“We’re building momentum in fresh,” he said. “We know it drives traffic [and] it has a strong margin.”

E-commerce to hit $16B in U.S.

Walmart said it expects its U.S. e-commerce sales to grow about 40% next year, to about $16 billion, after achieving 62% growth in the first half of the current year.

Marc Lore, president and CEO of Walmart eCommerce U.S., said the company still expects to lose money in its e-commerce business next year, though it anticipates the loss to be less than in the current year.

The company is seeking cost-cutting opportunities throughout the company, leveraging automation and technology wherever possible, to fund its ongoing investments in e-commerce.

As part of its efforts to improve the e-commerce experience for customers, Walmart is in the process of hiring about 2,000 product specialists to manage the online merchandising of the company’s top 1 million SKUs. Each product specialist would be responsible for the presentation and pricing of a subset of products online — ensuring that the product descriptions are accurate and engaging, for example, and that they come up near the top of search engine results.

The company has hired about 250 of these specialists already, and is continuing to add about 40 to 50 more each month.

Walmart is also seeking to make itself more attractive to upscale brands, in part through its Jet.com division, the e-commerce site founded by Lore.

The company is positioning Jet to attract more “affluent, higher income, urban Millennial customers,” which will in turn attract more upscale brands, Lore said.

He also cited grocery as a key element of the company’s online success and burnishing its reputation as an e-commerce provider.

“It starts with fresh. It starts with consumables,” said Lore. “If you can offer fresh produce and consumables at the best possible price, with a really good experience, whether it be for pickup or delivery, then you have a good chance of building a longstanding relationship that you can then use to sell the rest of general merchandise.”