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Walmart Inc. has found a new way to save millions of dollars: change the floor wax that it uses in its stores.
According to financial director of retail giant Brett Biggs, Walmart
WMT, + 0.78%
changed to a new floor wax that is both less expensive and more efficient, which reduces the number of polishes to be performed.
"This change of floor wax will save us over $ 20 million a year," he said, according to a FactSet transcript of the company's investor community meeting held on Tuesday. "So these small differences can make a big difference to Walmart."
This is just one example of how society approaches the way it spends and looks for ways to modernize its operations.
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"The capital allocation is very different from before and corresponds to the way we serve customers in the future," said Biggs. "We have reduced spending on new stores and clubs in the United States … and have allocated more capital to e-commerce, store renovation, supply chain and technology. And that's pretty much the kind of allowance I think I can expect in the next two years. "
In his address, Executive Director Doug McMillon highlighted the ongoing "cultural shift" at Walmart, including a focus on blockchain use for food security. and the suppression of emissions from its supply chain. He also talked about the trial and error it takes for some of the changes to come to fruition.
"Of course, some of the things we tried did not work or did not work yet," he said. "We tried grocery delivery with Uber and Lyft, but we switched operators because we all learned that it was different to move a grocery cart than to move people or a restaurant order.
"We do not have the right model yet to adjust the number of associates, but that makes sense, so we're working on the next iteration," McMillon said.
Analysts left the meeting optimistic about the path followed by Walmart.
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"Walmart is seizing the moment to transform into innovative and utilizing unique assets from stores, grocery stores and staff," Cowen analysts, led by Oliver Chen, wrote in a note.
Among the "most important weapons" of the retailer, it uses 4,761 US sites to run the delivery service (there are also 597 Sam's Club sites, according to the company's website), its academies will train 500,000 employees in 2018 and his relationships with pharmacists. These are also features that make the company "impossible for Amazon," analysts said.
Cowen estimates that Walmart shares outperform with a price target of $ 115.
Walmart has reduced its earnings outlook for the year and Cowen admits medium-term pressures that could lead to headwinds on gross margins and profits. But analysts believe that the instructions are "feasible and achievable".
J.P. Morgan's analysts said the company's risk-taking and investment capacity put it ahead of its competitors.
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"Leaders continue to play the game with high-end, with priority given to earnings growth (although significant spending cuts allow the company to prioritize sales growth)," have written the analysts.
JP Morgan also highlights Walmart's "many" cost-effectiveness opportunities, its ongoing efforts to develop its product mix – most recently with the acquisition of the online lingerie company Bare Necessities – and accelerate the speed of delivery over the next two years.
Analysts also noted how Walmart handles rate threats.
"Walmart will take a balanced approach with price increases, repercussions on suppliers, changes in supply and a deterioration in margins," writes J.P. Morgan in a note.
Walmart's Biggs said the retailer buys two-thirds of its US purchases in the domestic market. Walmart, with Target Corp.
TGT -1.62%
and other retailers, warned that tariffs would increase the cost of goods for buyers.
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"[W]We will do everything in our power to increase prices, but there are certain environments in which we would raise prices because of these rates and we will have to manage the margins in such a way as to make a price that makes sense for customers and consumers. shareholders, "he said.
JP Morgan notes neutral Walmart shares with a target price of $ 108.
Quo Vadis Capital President John Zolidis said Walmart is moving from a traditional retail model to a model that optimizes its assets, like its stores, for customer transactions, online or in a physical store.
"We believe this strategy (associated with retail fundamentals, including reinvestment in price and labor) is operating on the basis of the current momentum in store sales and growth in retail sales. sales of e-commerce ", notes Quo Vadis. I said.
While we do not know when margins and returns will increase, "the most important thing for us is that Walmart continues to grow its revenues and take a share and position itself in the long term in an environment that has drastically changed. changed compared to the one adopted. for which his model was originally designed. "
Walmart shares are down 2.2% since the beginning of the year, but have risen 12.3% over the past 12 months. The Dow Jones Industrial Average
DJIA, -0.36%
is up 9.8% for the last year.
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