Momentum, Discipline and Investment are Driving Growth, Leverage and Returns

Opening Remarks -- Meeting for the Investment Community 2012

By Mike Duke

October 10, 2012

Opening Remarks -- Meeting for the Investment Community 2012

Remarks as Prepared for Mike Duke

In my closing remarks last year, I said that our business was stronger than it was the year before … and that it would be even stronger when I stood here today. I want to appreciate our managers and more than 2 million associates worldwide, because working together, we have made good on that promise.  

Throughout the day, you’ll hear the message from our leadership team that you’ve consistently heard over the last few years -- growth, leverage and returns.  With my remarks, I also want to focus you on three additional words -- momentum, discipline and investment -- because these are driving growth, leverage and returns.  

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We have momentum in our core business that’s producing top line and bottom line results.  We’re delivering on the productivity loop and being even more disciplined about operating expenses and capital spending.  We’re making investments that are creating a better business. 

We certainly have areas where we can improve, and we’re very focused on them.  But let me be clear -- Walmart is strong, and we are getting stronger.

In Walmart U.S., our business is in a very good place.  Bill and his team have made progress on a number of fronts that are driving stronger comp sales.  We’re executing on the fundamentals of assortment and price, driving success in key merchandise categories, and are focused on the customer.   We are delivering on leverage and productivity goals and investing those savings in price leadership. 

For these reasons and others that you’ll hear later, Bill and his team are optimistic about the second half of the year and keeping the momentum going through the holidays.  And I think that’s right.  I’m impressed by both the plan and the energy I’m seeing throughout the organization to give America the absolute best possible Christmas.

At Walmart International, I like how we are positioned around the world and the markets we are in present great opportunities. Our growth is strong, and we are winning customers and gaining share in almost every country in which we operate. 

Doug and his team are making progress on delivering EDLP and EDLC, and they are very focused on improving ROI. Their focus on the Walmart Way of Working is leveraging best practices in productivity and systems across the globe.  The Massmart integration has progressed well.  Our entry into the growing African economy will benefit shareholders. 

As we’ve discussed before, we made a decision almost a year ago to slow our new store growth in Brazil. We also slowed in China to improve the quality of our new store openings, and we put additional procedural steps in place in Mexico. While the quality of openings is our priority, we will still expand at an aggressive rate and add between 21 and 23 million total square feet in international this fiscal year. 

At Sam’s Club, Roz and her team continue their strong performance.  Wholesale clubs, as a retail channel, are growing more and more competitive, and we are focused on providing value and price for our members.  We have a clear strategy to further strengthen our merchandise offering.  We are testing new ways to engage existing and prospective members and to increase membership renewals and revenue.  So far we are pleased with the results of those tests, which are still in a very early phase. 

When I think of momentum, I also think about the leadership Walmart is providing on issues like sustainability, the economic empowerment of women, nutrition and hunger, and agriculture.  And this leadership is being recognized.  A couple of weeks ago, I was honored when President Bill Clinton called me and asked me to sit on the opening panel at his Clinton Global Initiative.  The President was very kind with his words, and what great company for our company to keep.  At Walmart, we thrive on the high expectations the world has for us.


My second message to you today is our discipline around both operating expenses and capital spending.  At Walmart, we’re disciplined about how we spend money.  And it’s an area where I’m personally committed.  It’s essential to our business model.  And it’s part of our DNA.  Sam Walton taught us to count every penny … and to make every penny count.

Three years ago at this meeting, we committed to leveraging expenses.  Last year, we raised the bar further by setting a goal to reduce SG&A as a percentage of sales by at least 100 basis points over five years.  I’m really proud that Walmart has now leveraged expenses for 11 quarters and is on track to meet our larger five-year goal. 

All of this is part of our recommitment to the productivity loop, which is paying off in savings, lower prices and more sales across our business. 

Now you’re going to see us bring the same increased discipline to our capital expenditures that we have been bringing to operating expenses. 

You will hear more details today about our cap-ex plans for next year and our strategies for ongoing cap-ex discipline. We are driving efficiencies in new stores and remodels by reducing construction costs while keeping our square footage growth where we want it to be.  We are smarter about matching our systems investments to the size of the box and the need of the market.

Let me assure you, I am personally committed to discipline in how we spend money at Walmart.  It doesn’t matter whether our business is facing headwinds or the wind is at our backs, we will only spend wisely, and those investments will be good for our shareholders.


We are making investments that are building our business and positioning Walmart to succeed in the future -- both for the short-term and the long-term.  These are also being done with a tremendous amount of discipline.  Our primary investments continue to be in new stores and improvements to our current stores and clubs. 

This has also been an important year of progress for us in Global eCommerce.  We’ve assembled best in class teams in Silicon Valley and around the world.  I believe we are playing to win in a very real way now -- driving innovation, working together across the entire business and investing in our vision.  Our efforts are strengthening an already good business. 

Let me give you three examples. The first is our new world-class search engine, which has already improved conversion on Walmart.com by 10 to 15 percent.  Another example is the new global platform we’re building to significantly increase the assortment of products available on our sites worldwide.  A final example is our investment in Yihaodian, which we hope will close in a few weeks.

I feel even more strongly today that our trusted brand, our relationship with over 200 million customers, and our operations in communities where those customers live and shop, position us very well in eCommerce. You will hear more about our eCommerce strategies from Neil and each of the segment leaders.

Another place where we’re making investments is shared services, systems and global processes.  We are seeing the productivity and expense benefits of our global process work in scheduling and in the back rooms and front ends of our stores.  Our shared services strategy will increase productivity as it rolls out across the globe, most recently with the consolidation of our Central American financial shared services locations into a single center in Costa Rica. 

As I said at the start of my comments, I believe that the combination of momentum, investment and discipline will continue to deliver growth, leverage and returns for our shareholders. 

We will generate growth through comp sales from existing business, new stores and eCommerce.  Our international business will continue to be a growth engine.  And at Sam’s, we’re pushing hard to accelerate growth in membership and top line sales. 

Our op-ex and cap-ex discipline, combined with our initiatives in areas such as shared services and global processes and sourcing, will help us to continue delivering on our leverage goals. 

You know people keep asking me how much more we can we do in leverage.  To be sure, we’ve come a long way with leverage.  And frankly … we’re at an earlier stage with capital expenditures.  My commitment is that we have a lot of open road ahead even beyond our current plans. 

We will also continue to deliver returns to our shareholders through dividends and share repurchases.  You will hear from the presenters today more information on returns and our strategies to maintain industry-leading ROI levels for our business.  

I’m proud that our strong and consistent financial results and our strategies for the future are reflected in our stock performance.  It’s a credit to the hard work of our associates around the world.

At Walmart, we have the strongest management team we’ve ever had and more depth and expertise across key areas.  We have a business that delivers for our customers, associates, shareholders and communities. 

As far as we’ve come, I believe we still have a lot of upside.  Our strategies are creating an anytime anywhere relationship with our customers that will allow us to serve them better than any other retailer.  In this changing landscape of commerce around the world, I truly believe that we will continue to be the healthiest and best-positioned global retailer.

Thank you.  Now I’ll ask Bill Simon to come up and tell us about the Walmart U.S. business…