Walmart Plays Catch-Up in Investing in the Business

Executive Summary

• Walmart held its annual investor day today in New York. The presentation focused on Walmart stores in the US and e-commerce. Overall, the company is working to improve its in-store experience and developing a seamless offering through the expansion of its e-commerce/m-commerce capabilities. These efforts, though a long time coming and necessary, could ultimately take time to bear fruit, and the next several years could prove to be a period of transition.
• The company reset the bar in terms of its guidance for the next few years: it will ramp up investment spending as it makes up for its lack of spending over the last several years. The bulk of the $1.2 to $1.5 billion in incremental capex will be allotted to an increase in wages for entry-level associates and to other investments in people and e-commerce.
• Management described the back-to-school season as “pretty good,” noted that Halloween is off to a good start and said that it expects the holidays to be highly promotional but “fine.” The US economy was characterized as “okay,” “steady” and “generally in pretty good shape.” Management believes consumer sentiment and willingness to spend have improved.
• A key focus of the presentation—and a topic that elicited numerous questions—was existing and incoming competition in the discount space. Walmart plans to recapture its position as the low-price leader and widen its margin versus competitors, though management noted that this would likely happen over the mid to longer term.
• Walmart is continuing to invest in the e-commerce segment and in building out its offerings. Examples include in-store pickup capability for online/mobile orders and grocery delivery, which will be available in 20 markets by the end of the year and will continue to expand.