Ironically, today’s earnings report from Wal-Mart proves the point I made in my Blog “Low earnings /Low Profits – What to do?”
I have a love/hate relationship with Wal-Mart. I often shop their begrudgingly. I would prefer to support a local business, but when I am buying toothpaste my choices are generally a Wal-Mart, Chain Drug Store, or grocery store. There really aren’t too many local businesses to buy toothpaste from. Wal-Mart is cheaper, and there are always other items that I get while there. They save me time and money and there for they are a value. I support local when possible, but frankly I couldn’t afford to buy as many things if I shopped only local and I am a typical American who wants as much stuff as possible.
Yesterday Walmart announced that 2015 Q4 revenue was down, and they expect very little sales growth for all of 2016. Same store sales were reported to increase less than 1% in 2015. To insure they can meet or beat earnings, they have decreased operation costs and reinvested in Human Capital, choosing to focus on culture over new market channels.
Announcing the closure of 269 stores worldwide and releasing close to 10,000 workers will surely get a lot of attention. But Wal-Mart is focusing the narrative on developing its Culture. Wal-Mart is investing by raising the wages of it workers. This is very strategic since they have a history of Legal and Public Relations issues around wages and practices. Improving employee engagement will help drive business into their well established retail presence. I support this strategy, but I think they have a lot of work to do besides raising wages.
Walmart recognizes that the growth of online shopping has impacted brick and mortar and they have already begun testing new strategies to target these areas. Experiments in the Grocery offerings (Organic Product selection & home delivery), introducing their price matching app (which is awesome), the ever expanding electronics section, and the “No Questions return policy” to name a few will go along way to exceed customer expectations and build loyalty.
So…… sales are stagnant, they are giving nearly everyone a raise, and adding to their operational costs….how is this a good plan?
Well to start, the Thursday announcement also mentioned that they beat earnings and brought in a higher dividend than forecast. Earnings came in at $1.49/ share on a projected $1.46 and quarterly dividend was .50 on a projected .49. At the open of today their stock is down ~4% and they have fallen ~27% over the last 12 months.
But they still had a 2% increase in dividends and profit!
What would your business do in this situation? Can you bring in a higher profit while loosing expected revenue? Would you give a raise to help increase store sales?
Proper planning, strategy, and vision makes the difference.