While the holidays are a high-stakes time for every retailer to meet customer expectations, Wal-Mart has the added burden this year of trying to restore the confidence of investors who have driven its stock down 29 percent this year. It issued an updated outlook Tuesday that appeared to help with that, as it nudged up the lower end of its earnings guidance for the year.
Some of Wal-Mart’s success this season will hang on whether customers respond to its efforts to hurdle into a more digital-centric future, such as with its in-store pick-up program for online orders, and its tactics to make seasonal shopping more pleasant, such as the addition of in-store Santas and holiday music.
The retailer is also doubling down on measures that will be less visible to shoppers but that might be even more crucial to ringing up sales — in particular, it is trying to ensure that it doesn’t frustrate shoppers by being out of stock.
Wal-Mart saw sales rise 1.5 percent at U.S. stores open more than a year, its fifth consecutive increase on this measure and a possible indication that its efforts to improve its stores are working. Chief executive Doug McMillon held up this increase as evidence of improvement in the business. But he also told investors during a conference call that “we still have plenty of work to do, and there are areas of our business that must perform better.”
For months, Wal-Mart executives have been touting their goal to be “clean, fast and friendly” by the holidays. That’s company shorthand for a strategic plan that includes making its stores tidier, easier to navigate, and better-stocked, as well as trying to ensure that customers encounter more engaging service. With the holiday season about to kick into overdrive, executives said Tuesday that customer surveys show they are now meeting their goals on these efforts in 70 percent of their 4,600 U.S. stores.
During the holiday season, the retailer is aiming to further bolster the customer experience, including by adding in-store Santas in many outposts, something it has not consistently done over the years. It also is spinning holiday tunes this year — in fact, Wal-Mart U.S. chief executive Greg Foran said last week that the retailer is looking into ways it might even be able to take shopper song requests. The retailer is encouraging store employees to dress festively.
McMillon has said he believes that his chain’s massive fleet stores are an advantage in its bid to capture more online shopping dollars. The retailer is betting that its store pick-up program will help it make that case, hiring 3,500 department managers for these counters this holiday season. It also has been trumpeting a new mobile check-in feature for this program, in which shoppers can let the store know when they’re pulling into the store parking lot so their order can be ready for fast retrieval.
Behind the scenes, Wal-Mart is scrambling to make sure shoppers do not encounter empty shelves. Steve Bratspies, the chief merchandising officer for Wal-Mart U.S., has said that the chain has lined up larger-than-usual quantity of the items it expects to be particularly in demand, such as electronics. And in order to get more inventory out of the backroom and in front of customers, Wal-Mart has added an extra shelf to the top of existing shelves in the toy aisle.
If keeping shelves stocked doesn’t seem like it should be a particularly vexing conundrum for a seasoned retailer, consider the example executives recently offered of how the retail giant’s bicycle business functions during the holidays. A single Wal-Mart store churns through its inventory of bicycles an average of seven times over the course of the season. Many of those bicycles don’t arrive in the stockroom assembled, so a store might employ six or seven full-time workers for the holidays who only assemble bikes. And it’s a type of purchase that often catches the eye of last-minute shoppers, Foran said, so some individual stores can sell 300 to 400 bikes on Christmas Eve alone and have to be ready to accommodate that spike.
Wal-Mart knows it will lose out on sales, and perhaps customer loyalty, if customers come to their stores looking for an item and find it is not in stock.
“We’re doing things here in a very long-term, deliberate way: Growing sales, working on creating a seamless shopping experience,” Foran said on a Tuesday conference call with reporters.
Wal-Mart’s earnings per share were $1.03 this quarter. Its net income was $3.3 billion, an 11 percent decline from the same quarter last year. The company’s stock rose 3.5 percent Tuesday, as the results exceeded analysts lowered expectations.
The retailer said that better in-stock positions, along with improvements in its fresh offerings, helped propel its food category to its best sales performance of the year so far in the most recent quarter. Other categories that performed relatively well include apparel, home and seasonal items such as Halloween costumes and decor.
Wal-Mart said its e-commerce sales rose 10 percent in the quarter. The retailer said growth in this channel was crimped by a gloomy consumer environments in Brazil, China and the United Kingdom.
Other major chains have delivered mixed earnings results in the lead-up to their holiday showdown: Kohl’s saw a relatively upbeat 1.2 percent increase in sales, while Macy’s disappointed investors with a stunning 5.2 percent drop in revenue in the third quarter. Retail heavyweight Target is set to announce earnings results Wednesday; Best Buy and Gap will follow on Thursday.
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