Walmart Plans to Add $130 Billion in Sales Over Five Years - Yahoo Life

The sheer size of Walmart Stores Inc. long made it a force of nature in the consumer world.

And with revenues of $611 billion last year, the size is still very much there.

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But now, fashion is front and center in the business, especially online, where the retailer has 200 million apparel stock keeping units out of more than 400 million skus overall.

Walmart has pivoted from a bread-and-butter bricks-and-mortar retailer in recent years to become a more forward-leaning Amazon competitor looking to layer in a lot more tech savvy.

The company’s investor meeting in Tampa, Florida, on Wednesday made it clear just how far the company has come — and just how far it plans to go, adding more automation while focusing on omnichannel growth, costs and return on investment.

Walmart is looking for sales and operating income growth over the next three to five years.

If it’s a new path for Walmart, Doug McMillon, president and chief executive officer, said it gets the giant company to the same place.

“We’re dedicated to helping people save money and live better,” McMillon told analysts at the meeting, which was webcast. “Our strategy is simple. It’s to bring this purpose to life for our customers and members.”

A simple overarching strategy, but one that requires a lot more moving parts than retail alone.

McMillon made clear just how vital connecting clicks and bricks is for Walmart today as he went over the firm’s omnichannel positioning, noting that it’s “about service to our customers and members. We don’t exist if we don’t serve them well across our markets.

“They can take their phone and shop anywhere, anytime they want,” the CEO said. “They can pick up an order or they can have it delivered in some markets. They can have it delivered all the way into their refrigerator. We’ve now scaled those capabilities and are well-positioned for future growth.”

Where Walmart saw growth of 3.1 percent to 3.6 percent in the three years before the pandemic, the company is now looking for 4 percent sales growth and more than 4 percent operating income growth over the next three to five years.

That would add more than $130 billion in sales to the company’s top line over the next five years — akin to adding on Target Corp.’s annual sales of $109 billion as well as Kohl’s Corp.’s $18 billion top line.

RELATED: Walmart’s Fourth Quarter Tops Estimates

“Going forward, that growth will be enabled by our strength in physical retail and our expanding digital relationship,” McMillon said. “Fueled by pickup and delivery. We’ll build on that digital relationship with our first- and third-party e-commerce assortment and general merchandise in particular….This is not just a U.S. brick-and-mortar business. We’ve built a set of mutually reinforcing businesses that drive growth and engagement from customers and members.”

A Walmart customer picks up a package.

Walmart has long sought to bring in new shoppers with groceries and consumables and then snag them with fashion.

“As higher income customers come to us, whether that’s in Walmart or Sam’s Club, our opportunity to do good, better, best merchandising is a fantastic opportunity,” the CEO said. “We can put fashion apparel out under the Scoop brand or the Free Assembly brand and everybody responds to that in those income levels. I think the apparel business in Sam’s Club…is another example. So one of the things I love about this business is how flexible it is.

“You can be a merchant with opening price points, you can be a merchant with better goods, you can do that in stores, you can do that in clubs, you can do that online,” he said.

E-commerce drives $82 billion in sales for Walmart, for 14 percent of net sales, up from $25 billion or 5 percent only five years ago.

To realize that growth, Walmart has been steadily adding third-party sellers to its marketplace, putting more goods on offer and also opening up opportunities to sell those other merchants services like fulfillment.

With about half of the goods the company carries online coming under the fashion umbrella, Walmart’s continuing digital push is a still-growing competitive threat — or online sales opportunity — for the rest of the apparel industry.

As it grows, the company is focusing more and more on digital profitability.

“We are already seeing a directional change in our digital margins as we leverage our stores to fulfill, activate our local delivery networks and scale up high margin value streams such as advertising, data memberships and marketplace,” said chief financial officer John David Rainey. “We don’t have to squint our eyes or cross our fingers to imagine profitability in this channel and Walmart U.S.”

That means more robots, data and software.

Rainey said the firm’s investments in automation are “far exceeding our productivity targets” as inventory flows through the system at lower cost and with less manual labor.

“In three years, we expect that approximately 65 percent of our stores will be serviced by automation and we estimate approximately 55 percent of our fulfillment center volume will move through automated facilities and unit cost averages could improve by approximately 20 percent,” Rainey said.

That has Walmart, after a long period of testing and spending, leaping into a far more digital business.

The company was careful to say that this increased emphasis on automation will lead to jobs that require less physical labor and have a higher rate of pay for its workforce of 2.1 million employees, which is expected to stay the same or increase as new roles are created.

“Retail has changed a lot in the last five to 10 years and the change over the next five to 10 years is likely to be just as significant,” the CFO said. “Customers are demonstrating preference for multichannel offerings, convenience, value and selection — and up to this point for most it’s proving challenging to provide all of these things at attractive economics.”

The economics at Walmart, of course, have always been a little different — and bigger.

Investors seem to be along for the ride, trading shares of Walmart up 1.7 percent $149.67 on Wednesday.

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