As Walmart increasingly adopts automation across its business, including at its stores, one of the likely outcomes is that jobs will require less physical labor but have a higher rate of pay.
During its two-day 2023 investment community meeting, which kicked off yesterday, Walmart’s leadership is discussing how the company is investing to bolster its business through its people and a next-generation supply chain network of stores, clubs and fulfillment centers, and spurring future global growth opportunities across its omnichannel ecosystem and high-value initiatives. The retailer also reiterated its first-quarter and full-year guidance for fiscal year 2024.
“We are in a unique position to serve our customers and members however they want to shop, which will fuel continued growth,” said Walmart President and CEO Doug McMillon. “As we grow, we will improve our operating margin through productivity advancements and our category and business mix, and drive returns through operating margin expansion and capital prioritization.”
Throughout the meeting, the company will spotlight its purpose, unique culture and the importance of its associates and introducing a plan for a new, more connected and automated supply chain, which will aim to improve the experience for customers and associates while boosting productivity.
Walmart is re-engineering its supply chain to meet customer needs with a more intelligent and connected omnichannel network enabled by greater use of data, more intelligent software and automation, with the goal of improving in-stock inventory accuracy and flow, whether customers shop in stores, pick up items ordered online or receive a delivery.
On April 4, Walmart showcased its Brooksville, Fla., regional distribution center as one example of how the company is creating a scaled system of supply chain capabilities that employs a combination of data, software and robotics. Through automation and state-of-the-art technology, Walmart demonstrated how the greater item storage enables the facility to provide a more consistent, predictable and higher-quality delivery service to stores and customers and react more quickly to customer demand.
Walmart stores operate as places to shop and as fulfillment centers and delivery stations. Distribution and fulfillment centers contain a mix of items from suppliers and sellers. According to Walmart, this allows the company to use its existing assets more flexibly and efficiently for new ways of working.
By the end of fiscal 2026, Walmart predicted that about 65% of its stores will be serviced by automation, approximately 55% of the fulfillment center volume will move through automated facilities, and unit cost averages could rise by around 20%. As these changes roll out across the business, one of the likely outcomes is that jobs will require less physical labor but have a higher rate of pay. The company said that it anticipates increased throughput per person over time, due to the automation, while maintaining or even increasing the number of associates as new roles are created. At the present time, however, Walmart has reduced or eliminated weekend and evening shifts at five of its e-commerce fulfillment centers, a move that has led to hundreds of worker layoffs.
Walmart’s growth investments will center on three key building blocks: sales growth from its omnichannel business model, diversifying earnings streams through improved category and business mix, and scaling proven high-return investments that drive operating leverage and improve incremental operating margins.
“We believe that we have the building blocks in place to help define the next chapter of retail and do so while driving strong growth and shareholder returns,” said Walmart EVP and CFO John David Rainey. “Looking at where we are today, we believe that approximately 4% sales growth, and growing operating income at a faster rate, are still the appropriate targets for our business over the next three to five years. The investments we’ve made have positioned us well and stand to generate steady and sustained growth at higher margins. Achieving our targeted 4% sales growth over the next five years would add more than $130 billion of sales on top of our roughly $600 billion base today. On top of that, we think the opportunity for operating income growth over the next three to five years could be better than what we’ve outlined.”
The company’s multiyear growth outlook assumes that all three business segments contribute to its mid-single-digit sales growth target. Walmart is beefing up its global omnichannel ecosystem and scaling higher-margin value streams that serve customers and businesses and are natural connectors to its omnichannel retail business. Among these are advertising, data, memberships and marketplace, all of which the retailer believes will help deliver a better customer and member experience while driving stronger returns.
Walmart also reiterated its fiscal 2024 first-quarter and full-year guidance. For Q1, consolidated net sales are expected to increase 4.5% to 5.0% on a constant-currency basis; consolidated operating income is expected to increase 3.5% to 4.0% on a constant-currency basis, negatively affected by 235 basis points from last in, first out (LIFO); and adjusted earnings per share are expected to be $1.25 to $1.30, including an expected 3-cent impact from LIFO.
For the full year, consolidated net sales are expected to increase 2.5% to 3.0% on a constant-currency basis; Walmart U.S. comp sales are expected to increase 2.0% to 2.5%, excluding fuel; Sam’s Club U.S. comps are anticipated to rise by about 5.0%, excluding fuel; Walmart International net sales are expected to increase by about 6.0% on a constant-currency basis; consolidated operating expenses are predicted to grow slightly as a percentage of net sales on a constant-currency basis; consolidated operating income is expected to increase by approximately 3.0% on a constant-currency basis, negatively affected by 100 basis points from LIFO; adjusted earnings per share are anticipated to be $5.90 to $6.05, including an expected 14-cent impact from LIFO; and capital expenditures are predicted to be flat to up slightly in total dollars versus last year, with a focus on technology, supply chain and customer-facing initiatives.
Each week, approximately 240 million customers and members visit Walmart’s more than 10,500 stores and numerous e-commerce websites under 46 banners in 24 countries. The Bentonville, Ark.-based company employs approximately 2.3 million associates worldwide. Walmart U.S. is No. 1 on The PG 100, Progressive Grocer’s 2022 list of the top food and consumables retailers in North America.