Walmart On Path To Earnings Growth As Turnaround Strategy Takes Shape

Walmart’s turnaround strategy seems to be working as evidenced by the annual guidance the retail giant gave out during an investor day conference last week. At the event Walmart indicated that the adjusted earnings per share would grow by 5% in fiscal year 2019. This would mark the first time in four years the retailer has recorded earnings growth.

Since 2015 when Walmart outlined its turnaround strategy the stock has appreciated by over 50%. At the investor conference, Walmart indicated that the adjusted earnings per share guidance for the fiscal year 2018 would range between $4.30 and $4.40. In 2018 Walmart expects revenues to grow by around 3% while e-commerce in the United States will grow by around 40% in the same period. Walmart also indicated that in the course of the coming two years the retail giant will embark on a stock buyback program for shares worth $20 billion.

Fewer outlets being opened

One of the biggest changes Walmart has made in its strategy is to stop the opening of new outlets in the United States. For decades Walmart put up new and bigger outlets all over the U.S. in order to increase sales. That strategy cannot however work in the age of e-commerce. In 2015 Walmart launched 21 Sam’s Clubs, 235 Neighborhood Markets and 119 Supercenters in the United States. Next year the retail giant intends to unveil Neighborhood Markets numbering fewer than ten and Supercenters numbering fewer than 15.

Walmart’s capital expenditures will remain the same however as it has set aside a $11 billion budget for 2018 which was just about the same as the budget for this year. Rather than open new outlets Walmart is spending that money on the improvement of existing stores where some are being remodeled and digital experiences being prioritized. This will see grocery pickup locations for online orders increased an additional 1,000 and the e-commerce supply chain improved.

Hybrid initiatives

So far the e-commerce initiatives that Walmart has found success in are in hybrid efforts such as online grocery pickups where the retail giant is leveraging its physical outlets. Since there is a Walmart store within ten miles of about 90% of the population in the United States, Walmart no doubt views its store network as offering it a competitive advantage.

Walmart has also made acquisitions as part of its turnaround strategy. This includes purchasing online retailer at a price of $3.3 billion and delivery firm Parcel at a price of under $10 million.

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