Opening Remarks: 20th Annual Meeting for the Investment Community
Remarks as Prepared for Mike Duke
Good morning! As always, I’d like to begin by thanking you for being here. I know that many of you were travelling to Northwest Arkansas on Columbus Day. So we really appreciate that you gave up a day off with your families to join us. We are looking forward to your questions and a productive discussion throughout the meeting.
Over the last few years, you have heard me talk about our financial priorities -- growth, leverage and returns. And you will hear about those again today. But I want to approach my time with you from a slightly different perspective. We just wrapped up our board of directors meeting a couple weeks ago. And I thought I’d share with you the same view on our business that I shared with them.
There is strength in Walmart’s businesses all around the world. We have a powerful enterprise. But as you know, we are in a tough and unpredictable global economy. So, there are near-term areas that we are focused on -- growing U.S. comp sales, improving returns in International, and leveraging expenses as a company for the fiscal year. I have been working closely with the segment leaders to develop focused plans that will deliver results in these areas.
At the same time, I feel really good about a number of areas that are critical to our long-term growth and shareholder returns. In some of these areas, in fact, we have made step change progress. We are getting results from our leverage initiatives. We are being more disciplined about how we spend capital. We are growing and we are more connected than ever with e-commerce. And we are building for the future with our investments in compliance, the quality of talent across our company, and our leadership on important issues facing the world.
At Walmart, we have delivered consistent growth and returns to shareholders over many years, and we will continue to do so. No matter what environment we are in -- today, a year from now, or five years from now -- we are driven to win. And we are never satisfied at Walmart until we do.
I want to start off with a brief word about the retail environment. As I said, we are in a tough and unpredictable global economy. I hear this from customers whether I am in a Sam’s Club in New Orleans, as I was a couple weeks ago with Roz … or visiting supercenters in Charleston, West Virginia, as I did recently with Bill … or walking stores in Brazil and Mexico with Doug. And it should come as no surprise that the government shutdown is on the minds of our U.S. customers. As you would expect, we’re following the situation very closely. The competition is also tough. I see it when I am out visiting their stores. And of course, the holidays are right around the corner -- raising the stakes even further on serving customers and delivering on performance.
All of this is to say that near term execution is critical for us. We are never satisfied. We always set out to be the best.
Let me dive right in with what is top of mind for many of you and a top priority for us -- growing U.S. comp sales. Today you will hear from Bill and his team about their plans for improving comps and net sales. When you go to our stores, you are going to see fantastic new merchandise, aggressive investments in price through lots of rollbacks, and better in-stock levels. We are focusing on execution to deliver results.
And the same holds true for Sam’s Club. You will hear from Roz about how we are going to drive sales and membership growth further in the second half by really focusing on delivering even greater value to our members.
Another top priority is to improve returns in Walmart International. We know we can do better -- even in places where we are already doing well.
Today, Doug and his team will share the plan to streamline our business by actively managing our portfolio and being the best-in-class operator. We assessed our portfolio and made important strategic decisions on current operations. These actions, combined with capital discipline and e-commerce investments, will deliver a solid framework for future growth and improved returns. International is a great business that we are only making stronger.
You are all familiar with our leverage goal. We want to reduce operating expenses as a percentage of sales by at least 100 basis points over five years. We made progress against this goal last year, and we are focused on leveraging expenses for this fiscal year. You will hear from every business leader how they are taking advantage of opportunities in areas such as logistics, sourcing and back room operations to churn the productivity loop and deliver every day low cost and every day low price.
Now, as I mentioned previously, there are a number of areas where I feel very good about our company. We are strengthening a foundation for long-term, sustained growth across our business segments.
Let me start with how excited I am about the investments we are making in leverage initiatives. You will hear more specifics from Rollin later today.
In the U.S., the logistics team is doing a fantastic job of reducing shipping costs and increasing transportation efficiency. In China, we have implemented a process initiative that is generating real savings in labor productivity. We also recently finished the migration of all markets in Latin America except for Brazil to our Costa Rican Shared Services Center. We are driving costs out of our system so we can invest those savings into lower prices for Walmart customers.
Capital discipline is another area where I am really pleased. We are much more streamlined in how we make real estate decisions and invest capital.
We are seeing stronger performance from our new stores. And we are bringing down the cost to build, expand and remodel. Over the past two years, the cost per square foot for new construction in the United States has come down by over 15 percent.
While supercenters remain our primary format for Walmart U.S., Neighborhood Markets and Express stores -- combined with e-commerce -- will be an even bigger focus in helping us drive growth. We had strong growth in the club channel this year and have plans for increasing access for Sam’s Club members. And of course International remains a growth engine for our company.
I love the progress we have made in e-commerce at Walmart. The biggest opportunity we have is winning the intersection between physical and digital retail around the world.
This afternoon, Neil and his team will discuss key initiatives like our global technology platform and next generation fulfillment networks. Our strategy to win means continued investments in executing on the fundamentals, innovating in new areas, growing in key markets and being the tie that expands the Walmart brand to even more customers.
I really believe this - we have never been more connected across the company on e-commerce. And our results demonstrate it. In the first half of the year, e-commerce sales globally grew 30 percent. That includes a strong performance from our investment in Yihaodian in China. I am very excited to be going back to Shanghai in just a few days and part of my agenda is to visit our associates at Yihaodian.
Let me turn now to compliance. Over the past year, we have made major investments in compliance. We have built better processes and procedures, increased training for our associates, and strengthened our organizational leadership. This is the right thing to do. But let me be clear on this point -- our progress with compliance makes us a stronger business for the long-term. Compliance is an essential part of our growth strategy.
Most important, let me talk about our people. I feel better than ever about our talented associates and the career opportunities we provide at Walmart. Last year, we promoted 180,000 people at Walmart U.S. and Sam’s Club and thousands more around the world. That is just one reason why our global associate engagement scores right now are the highest ever.
And let me tell you, the quality of the people we are recruiting is just incredible. Our leadership team in China is world class. In Global E-Commerce, some of the very best talent anywhere is excited about joining Walmart. We have also hired more than 16,000 veterans in the U.S. since Memorial Day.
A big part of our success with our people has to do with the difference our company makes around the world. And we have only accelerated in the past year -- with our commitments on renewable energy, on reducing certain chemicals in our products, and on helping to revitalize manufacturing in the U.S. We set the pace for how companies take on big issues facing society. And we will keep leading because it is good for our business.
Even in a tough and unpredictable economy, there is strength in our businesses around the world. We are making substantial progress in areas that are the foundation for long-term growth and shareholder returns. And whether I am meeting with the leadership team in the Home Office, or walking stores and clubs in any market, I see a team that is disciplined, focused and executing on the fundamentals -- delivering EDLC and EDLP, putting fantastic new merchandise on our shelves, and running great stores. No matter what environment we are in, Walmart will win.
Thank you again for being here today. We are looking forward to the discussion. I’d now like to welcome Bill Simon, the head of our Walmart U.S. business, to the stage.