Notes from Walmart's 2023 Investor Community Meeting

eCommerce and Retail Talk
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Walmart held a 2023 Investor Community Day, and it seemed to me to be a great example of a company executing on all cylinders. Great strategy, and great execution yielding top-line and bottom-line results.

It reminded me of a Target earnings call the past 5-6 years before the economic environment changed. Which tells me everything about Walmart’s priorities for the past 3 years leading up to this point – they were the right one to trash the unbridled investments associated with Marc Lore’s playbook and eCommerce as a separate unit, and get back to the basics of how Sam Walton built a great business in the first place – just modernize it.

The highlights:

  • Five Year Plan Shows Profitability Growing Faster than Sales. Top-line sales growth in 4% y/y range.
    4% CAGR will add another $130B on top of our existing $600B business.

  • Sams membership + Walmart Plus Membership + Advertising + Data + Fulfillment = 40% CAGR growth from FY 2020-FY 2023. Over $3B larger than FY 2020. Margins appreciably higher than existing business. This provides tailwinds to their gross margins and net operating margins going forward.

  • Pickup & Delivery CAGR 40% in last few years. These customers spend $1,000 more per year than traditional customers, and 50% of Walmart+ signups come from this group.

  • Walmart US has 400M SKUs online. 200M in apparel, 60M in home. Marketplace is a key driver of growth going forward. Focused on high quality items and sellers, monetizing fulfill

The rest of the details:

Overall Plan

  • Five Year Plan Shows Profitability Growing Faster than Sales. Top-line sales growth in 4% y/y range.

  • 4% CAGR will add another $130B on top of our existing $600B business.

  • Sales CAGR 8.2% in past 5 years. Operating Income CAGR 3%. Moving more to an operating income focus.

  • Gap between sales growth and operating income last 5 years is: tech/ecom investments, wages, and price leadership.
    ment, and activating advertising.

  • Sams membership + WMT+ + Advertising + Data + Fulfillment = 40% CAGR growth from FY 2020-FY 2023. Over $3B larger than FY 2020. Margins appreciably higher than existing business.

  • 2-3% Capex as a % overall sales is the expectation going forward. Very return-focused.

Retail

  • 90% of US population lives within 10 mile drive of the 4,700 Walmart stores.

  • Pickup & Delivery CAGR 40% in last few years. These customer spend $1,000 more per year than traditional customers, and 50% of Walmart+ signups come from this group.

(I hear a lot of people comment and tell me pickup is not profitable because people are not walking into the store, they forget the stickiness and spending aspect – convenience wins. do you want someone else to serve them?)

  • GenZ/milennials purchasing private brands. Private-label is 20%+ of WMT and 30%+ at Sam’s Club.

  • Walmart US has 22 own brands (private label) with over $1B in sales. 8 of them in food/consumables

  • MFC is a big strategy here. Inventory accuracy 99% with better sales floor experience for customers (less congesion). foundational supply chain capability is demand prediction across all formats, categories, distribution & delivery methodologies.

eCommerce & Marketplace

  • eCom is $82B or 14% net sales, compared to 5% just 5 years ago. Has a path to $100B in near-term.

  • Walmart US has 400M SKUs online. 200M in apparel, 60M in home.

  • Marketplace is a key driver of growth going forward. Focused on high quality items and sellers, monetizing fulfill

  • Seller count increased 50% y/y. 175% growth in sellers walmart fulfillment services. 100% growth in sellers using Walmart Connect.

References:

https://corporate.walmart.com/newsroom/events/2023-investment-community-meeting

https://corporate.walmart.com/newsroom/2023/04/04/walmart-outlines-growth-strategy-unveils-next-generation-supply-chain-at-2023-investment-community-meeting

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There has been quite a lively linkedin thread recently about whether CFC’s are cost effective (in response to recent Kroger updates). I’m of the view that they are, but it is a matter of scale and dense catchment (example of Tesco in London with 5-6), and maybe Kroger won’t hit that point (too many driven miles because of insufficiently dense catchment and insufficient market share/popularity)

Question is whether a WalMart MFC (for BOPIS, and maybe 15 vehicles) is really big enough to be classed as a equivalent to a dark store CFC (standlone/PUDO, maybe 50-100 vehicles outbound for delivery runs 2-3 times per day) practically

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Well dark store by definition customers don’t walk in. Whatever you call it, those dark stores are attached to the real stores :wink:

To my knowledge, they have not added sort centers (another kind of logistics point) downstream of a group of stores in an area used for route and carrier consolidation – similar to Target.

As their same day volume rises, perhaps they will.

I feel that Walmart is going to figure out MFCs. I’ve been impressed with the methodical approach that Walmart has taken. Allocating time to experiment and try multiple providers and format.

The basic formula works, and it’s better for guests. Now it’s on them to slowly model their stores to support the new format. I think they are doing something like 300 remodels a year now.

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