Walmart Private Brand Adopters Spend More

WALMART - GREG FORANYesterday, Wednesday, October 14th, Walmart held its 22nd Annual Meeting for the Investment Community. The presentation included comments from Walmart executives:

  • Doug McMillon, President and CEO, Wal-Mart Stores, Inc.
  • Charles Holley, Executive Vice President and Chief Financial Officer
  • Neil Ashe, President and CEO, Global eCommerce
  • Greg Foran, President and CEO, Walmart U.S.

The retailer provided its strategic outlook and growth plans for the future. And outlined their investments which are part of a framework designed to drive sales growth by strengthening the U.S. and e-commerce businesses. According to the retailer their framework is intended to enhance the experience in stores, leverage Walmart’s unique supply chain capabilities to lower costs and build deep digital relationships with customers.

“These are exciting times in retail given the pace and magnitude of change. We have strengths and assets to build on and are making progress to position the company for the future,” said Doug McMillon president and CEO, Walmart Stores, Inc.  “We’re encouraged by recent customer feedback and will continue to get stronger. Our investments in our people, our stores and our digital capabilities and e-commerce business are the right ones. We will be the first to build a seamless customer experience at scale to save our customers not only money but also time.”

Later in the presentation Greg Foran addressed the topic near and dear to our hearts… private brand and of course tempered his comments with the standard “we love national brands” while clearly spelling out the importance of private brand. You would almost think that he does not realize that Great Value, Equate, Mainstays, Marketside and Ol’ Roy are some of the largest brands in the world.WALMART PRIVATE BRAND 2

Foran begins: “Let me be clear we have always been a destination for quality national brand products at every day low prices and we will remain first and foremost a national brand retailer.

We know that our private brand customers are some of our most loyal, but private brands are key to addressing the price gap with hard discounters they are critical to our growth aspiration. So we have doubled our private brands team and our focus remains on delivering quality, innovation, price and ultimately increased market penetration for our customers.

WALMART PRIVATE BRAND 1So we’ve got key work streams in place to insure a well-defined brand architecture, we’ve got teams to develop and identify assortment gaps, extend product lines and innovations based on what we have learned from customers. And here’s what’s interesting as customers become Walmart private brand adopters, they also spend more trips, (sorry) they make more trips and they spend more. In fact of this increased spend half of it is on non private brand items, this means that as customers become more engaged with private brands they become more engaged with Walmart overall. So we are excited about the opportunity.”

The retailer also indicated that as a result of a stronger than anticipated impact from currency exchange rate fluctuations, it now expects net sales growth for the current fiscal year to be relatively flat.  Excluding the impact of currency exchange fluctuations, net sales growth would be approximately 3% for fiscal year 2016.  In February, the company indicated that it expected net sales growth of between 1 and 2%.

Charles Holley, Walmart’s executive vice president and chief financial officer, outlined the company’s financial priorities for growth and detailed the investment and expansion plans for fiscal year 2017.

“Our sales growth over the next three years is estimated to range between 3 to 4 percent annually, which will add approximately $45 to $60 billion in sales. Within the last year, we have experienced traffic and comp sales improvements in our Walmart U.S. business, and our plan reflects that positive momentum continuing,” said Holley.

McMillon said Walmart is bringing a disciplined approach to managing the company’s financial resources and portfolio. “We are actively reviewing our portfolio to ensure our assets are aligned with our strategy.  But we will be thoughtful in our approach, recognizing our responsibility to drive shareholder value,” he said.

Holley also discussed the company’s profitability over the long-term and provided more insight into certain financial metrics.

“Fiscal year 2017 will represent our heaviest investment period. Operating income is expected to be impacted by approximately $1.5 billion from the second phase of our previously announced investments in wages and training as well as our commitment to further developing a seamless customer experience,” said Holley.  “As a result of these investments, we expect earnings per share to decline between 6 and 12% in fiscal year 2017, however by fiscal year 2019 we would expect earnings per share to increase by approximately 5 to 10% compared to the prior year.”

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Christopher Durham is the president of My Private Brand and the co-founder of The Vertex Awards. He is a strategist, author, consultant and retailer who built brands at Delhaize-owned Food Lion, and lead strategy and brand development for Lowe’s Home Improvement. He has consulted with retailers around the world on their private brand portfolios including: Family Dollar, Petco, Staples, Office Depot, Best Buy, Metro (Canada), TLW (Taiwan) and Hola (Taiwan). Durham has published five definitive books on private brands, including his first book, Fifty2: The My Private Brand Project. In 2017, he will debut his newest book, Vanguard: Vintage Originals, a visual tour of innovation and disruption in private brand going back to the mid-1800’s. Dynamic in his presentation while down to earth and frank in his opinions, he has presented at numerous conferences, including FUSE, The Dieline Conference, Packaging that Sells, Omnishopper and PLMA’a annual trade show in Chicago. Durham lives in Charlotte, NC with his wife, Laraine, and two daughters, Olivia and Sarah.