Walmart is upgrading its operations and e-commerce offerings to better compete with Amazon, meet consumer needs and drive profitability. The Dow Jones retail giant during its analyst days Tuesday and Wednesday described a near-future of robots fulfilling orders. WMT stock rose Wednesday, back above a buy point.
Walmart Turns To Automation
Walmart placed a major emphasis on automation to drive productivity during its analyst presentations.
The company believes 65% of its stores will be serviced by automation and forecasts 55% of fulfillment center volume to move through automated facilities by the end of the 2026 fiscal year. Walmart expects that to improve average unit costs by 20%.
On Tuesday, Walmart announced plans to lay off more than 2,000 workers across five U.S. warehouse locations for fulfilling online orders, according to a Worker Adjustment Retraining Notification (WARN) filing Tuesday.
Still, Walmart said automating operations will increase throughput per person, letting it maintain or increase associates as new roles are created. Overall, the addition of robots to its warehouses will reduce the physical burden for workers, it said.
The Dow giant strives to reduce reliance on seasonal and temporary workers and grow its number of career employees, CEO Doug McMillon said during Wednesday's presentation.
Omnichannel Offerings
Walmart is focusing on high value, high-margin initiatives to help drive profitability and annual increases in return on investment (ROI), McMillon said.
The company continues to invest in its omnichannel and e-commerce business, which should drive sales growth and profitability in the next few years, CFO John Rainey said Wednesday.
It rolled out a revamped website and app as online purchases and grocery orders increase. Walmart's pickup and delivery business grew at a 40% compound annual growth rate over the past three years, according Rainey.
The company believes e-commerce improvements, including new site features and deals, will offer a "more engaging way" to browse and discover products. Walmart will also customize the user experience based on customer preferences and purchasing patterns, executives said Wednesday.
The overall goal is to meet customers through their various channels and improve logistics efficiency through automation.
Inflation Headwinds
Still, Walmart expects inflation to add pressure on its business this year and plans to slow hiring as it rolls out its automation initiatives. "We're assuming this year is going to be somewhat anomalous," Rainey said, projecting inflation around 3% by year-end.
Walmart Guidance
The retailer reiterated its Q1 and 2024 guidance late Tuesday. Walmart still sees 4%-4.5% net sales growth on a constant currency basis for the first quarter and adjusted earnings of $1.25 to $1.30 per share. The FactSet consensus sees Walmart earnings of $1.30 per share for Q1.
For the fiscal year, Walmart forecasts adjusted earnings between $5.90 and $6.05 per share on 2.5% to 3% net sales growth on a constant currency basis. Analysts expected Walmart earnings per share of $6.11.
Following the update, wealth management firm D.A. Davidson noted that Walmart's reiterated earnings and guidance are favorable and still leave some potential upside room. Walmart's Investment Community meeting is "showing off its supply chain muscle," the firm noted. And Walmart's distribution center automation should eventually improve throughput, lower costs, leverage expenses and enhance efficiency, D.A. Davidson wrote. The firm maintained its buy rating and 179 price target for WMT stock.
Walmart Stock
WMT stock rose 1.66% to 149.67 Wednesday, moving back above a 148.44 entry. Investors could view the 148.34 high on Feb. 21 as the start of a flat base or as key resistance within a consolidation going back to late November.
Walmart stock is up roughly 5.6% year to date.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
